Civ Pro II - Bahadur
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Erie Doctrine
 Erie Doctrine apples to diversity jurisdiction claims in federal court ONLY
o Conflict between two statutes (fed and state)
o 1652 - State law substantive unless the constitution or treaties, or statute states
otherwise
 1331 - is the exception (usually apply federal law, except with Grable claims)
 1332 diversity - usually state law because it is a state law claim (exception
Grable claims)
 The cases are only in federal court for fairness
 Both 1331 and 1332 follow federal procedural law if in the federal court
o Which States law governs?
 Choice of Law Rules - Horizontal Choice of Law Analysis
 Each state has rules about which state law should apply
 Federal court would apply the state's CoL rules - i.e. if brought in KS the
federal court in KS would apply KS CoL rules
 Vertical Choice of Law Analysis - State v. Federal (1332 claims)
 If the law in question is substantive - then state law applies
 If the law in question is procedural - then FRCP applies
o Swift (Overruled) - Would not take state CL into account - Idea that federal law judges
knew natural law better than state judges
 States of the Several only meant:
 State Constitutions
 State Statutes
 Local Rules
o Erie - Overruled Swift
 Black and White Taxicab
 Exclusive contracts illegal in Kentucky so the company moved across the
boarder bc exclusive contracts were legal in federal law
 Created Forum Shopping and Inequitable Application of the Law
 Overruled Swift by adding #4
 State Constitutions
 State Statutes
 Local Rules
 State Common Law - no such thing as federal CL and did away with
natural law
o Guaranty Trust v. York - Hard to tell if substantive or procedural
 Not always easy to tell if law is substantive or procedural
 If it makes a difference between federal and state courts it is Outcome
Determinative - State law cases outcome should be the same regardless if heard
in federal or state court
 In order to avoid FS and IAoL state law should be used if the outcome
would be different using state and federal laws
o Byrd - Division of labor issue between judge and jury
 Injured worker demanded a jury trial  State law - finding if statutory employee determined by judge
 Federal law - finding if statutory employee determined by jury
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There are certain rules in place that the federal court can't mirror
exactly from state courts
 If state law would impact an Essential Characteristic of the Federal Court
System (7th Amendment Due Process) then state law goes out the window and
federal law would be applied
o Hanna
 FRCP states filing stops SoL
 State law dictates that SoL stops when defendant is served
 The case was filed before SoL but defendant was not served before SoL ran
 OD is not enough alone - the laws need to be so different that it would affect
the choice of forum selection
 The difference between services is not enough of an outcome
 OD, alone, is not enough and must be viewed with the twin aims of Erie (FS &
IAoL)
 If there is a conflict between state law and valid federal procedure rule (FRCP)
then the federal rule wins (if in direct conflict)
o If no direct conflict between state law and FRCP and it is a diversity case in federal
court, then if the law in question is substantive state law should be applied. If unable
to tell if it is substantive and it is OD, then state law should apply so as to avoid FS and
IAoL unless it would impede an Essential Characteristic of the federal court system.
o The only way around Erie is through the 7th Amendment, which does not happen
frequently
Direct and Indirect Conflicts o Walker  FRCP - When case is filed SoL pauses
 State - 2 statutes - 1) Have to serve before SoL runs, & 2) identical to FRCP rule
 Because OK had a state law identical to FRCP it was an indirect conflict
 Not conflicting directly because the statutes covered different things
Direct - FRCP Wins
Not an FRCP - not direct - Substantive/Procedural? - OD? - Essential Characteristic of Federal
Courts?
o BN v. Woods - only applicable if it is a federal rule
 The state law modified the state law that was identical to the federal law, so the
state law ended up modifying the federal law, which it cannot do
 AL state law - mandatory 10% when an case that is appealed is affirmed - to
deter frivolous appeals
 FRCP 38 - if they deserve to be penalized sanctions are available
 State laws can modify other state laws
 When state laws modify federal/FRCP it is a direct conflict
 There is a presumption that state laws can legally co-exist such as in
this case, so long as they do not modify the federal law
 If a federal rule got rid of state law there would be more FS so the court must
attempt to find an indirect conflict as to not undermine state courts
Gasperini o The state standard of having the appellate court review the jury verdict can be applied
 Must decide whether sub/proc  Federal only overturns if it shocks the conscious
 NY gave more discretion to overturn jury verdicts
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Created a discrepancy on the amount able to be recovered - More
could be recovered in Federal court
 Because the amount recoverable differed - state law should be applied to avoid
FS & IAoL
o Reexamination Clause  Federal appeals courts can review based on discretion of the trial judge
Personal Jurisdiction
For personal jurisdiction you need:
1. Notice - need to have notice/service of the suit
2. Unfairness  Pennoyer o Seized land bought after judgement for payment of bills.
o 4 ways to fairness:
1. In Rem - the property is being sued - Property against the world
2. Quasi In Rem - person v. person but the property is largely involved/at
issue.
3. Consent
4. Present in state
 Harris - NC Case
o Treated debt as property to be seized.
 Hess o Out of state drivers consent to being sued in the state if related to accident.
o If you live in the state, or are present in the state, you have general jurisdiction
and can be sued for anything in that state
o If you live out-of-state you have specific jurisdiction and can only be sued for
actions related to being there
 MINIMUM CONTACTS - Necessary if not present in the state
 International Shoe
o More mobile nation than Pennoyer.
o Notice - Long arm statutes provide service to out-of-state defendants
o Minimum Contacts 1. Must be systematic and continuous
2. Suit must be related to activity in state (Specific Jurisdiction)
3. Case by case basis
4. So long as there is contact with the state and does not offend the
"traditional notations of fair play and substantial justice."
 McGee o Cannot have MC without purposeful availment!
1. Defendant needs to actively choose to have contact/business within that
state (PA)
2. Defendant needs to attach themselves with that state - do a positive act
that would protect them under the laws of that state
o Hanson (No PA) - The trustee did not make an active choice to be
connected/protected with Florida. The client chose to move but the trustee did
not avail himself of the laws of FL.
3. Notice - Long Arm Statutes 4(k)(1)(A)
o Defendant MUST be on notice of suit (served)
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State Statutes can spell out exactly what is covered and good services or they
can give all
o If the statute is fair - they are put on notice
4. Fairness - MC needed to determine fairness if not present in state
o Includes things that are obviously fair
5 ways to have fairness
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1. Presence
2. Property - IR
3. Property - QIR
4. Consent
5. Minimum Contacts + purposeful availment
 Volkswagen
1. Car sold in NY crash in OK.
2. Foreseeability + Targeting (not enough of a majority to choose between
SoC/SoC+)
 Alone it is not enough - cars are mobile and foreseeable to travel to other
states
 Need targeting the state as well. Can be through PA, like ads, dealerships,
etc. The company must PA itself of that state's laws (market, ads, sales).
3. MC  Inconvenient to the point of unfair
 States are equal Sovereigns
 Protects state's boarders and rights to hear cases regarding their
jurisdiction
 Calder
1. Similar to McGee - newspaper case
2. 1 intentional act can be enough for MC
PJ - Fairness + Notice - Need both
Pennoyer
1. Presence
2. Property
-IR
-QIR
3. Consent
Int'l Shoe
1. MC w/ PA
-defendant must deliberately choose to be bound by that state
-need foreseeability + targeting
-1 intentional act is sufficient
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Burger King
o Contracting is enough to show MC & PA
o MC - was good
o There is a presumption that PJ is reasonable in the forum
 Just because it is fair does not mean it is reasonable
o Factors to showing unreasonableness (burden shifting - D must show) are:
 Burden on the defendant to defend in that state
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Forum state's interest
Plaintiff interest in convenience and effective relief which might invoke
CoL considerations
Judicial economy by interstate corporations
Shared interest of public policies
 Almost usually never work (except in Asahi)
Asahi o Original case dismissed so all that was left was the impleader case (Rule 14
joinder)
o It was unreasonable to have 2 foreign companies in a suit in the US - was kicked
out by the unreasonableness factors
Stream of Commerce Rationale
o Brennan  Goods in SoC - it is foreseeable to end up anywhere, thus enough to = MC
o O'Connor  Foreseeable + Factor (SoC + factor)
 Ads in Forum
 Design product for the market in that state
 Established regular channels for providing advice to customers in
the forum (help line)
 Marketing through a distributor who is the sales agent for that state
Nicastro - British Machine Case (Nasty Nastro) (Still not enough of a majority
o Made in GB - Indep. Distributor in US - Owner - Owner - NJ
o General PJ - Live there and can be sued for anything
o Specific PJ - can only be sued for activity in that state
o MacIntyre (Machine manufacturer) did not specifically target NJ (adopts neither
O'Connor or Brennan so both are still good law)
 Could have said SoC ended after the first private sale
o Dissent (Ginsburg) - Boarders are an antiquated concept
PJ Jurisdiction Expanded o Bulge Jurisdiction - 4(k)(1)(B) - reaches outside state boarders (w/in 100 miles)
and joined by rules 14 & 19 but must be within a US District (Does not reach
across foreign boarders)
o Federal Question Claims - 4(k)(1)(C) - Some federal claims have nation-wide
jurisdiction
 Antitrust
 Securities
 Bankruptcy
o Arises Under (1331) - 4(k)(2)
RECAP
 Notice - Long Arm Statutes
 Fairness - Only need 1
1. Presence (Long Arm Statutes not need because within the state)
2. IR
3. QIR - I & IIA
4. Consent
5. MC + Purposeful Availment
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 I intentional act is enough for PA
SoC/SoC+ - both still good law
In Rem/Quasi In Rem
o Pure In Rem - Property v. World (often titled In re____ )
 Good Law
 Often Forfeiture or Probate Cases
o Quasi In Rem I - Plaintiff v. Plaintiff for ownership rights in property
 Good Law
 Quite Title actions or Competing interests in property
o Quasi In Rem II A - Suites directly linked to property
 Good Law
 Negligence - Property has something to do with suit
o Quasi In Rem II B - Action unrelated to property (NO GOOD)
 Seizing property to force them to defend suit
 Property is completely unrelated to suit
 Harris v. Balk (Debt was used as property)
 Ruled not good law in Shaffer
Shaffer o Overruled Harris (used debt as property to be seized to pay off different debt
and the original debt was completely unrelated
o QIR IIB is no longer good because it goes around MC
 MC & Specific Jurisdiction - suit must be the purpose of the
presence/action within that state
 Must have MC with the state
 In order for specific PJ the property must be the reason for the suit
Burnham - Divorce Case
o Married and Lived on east coast. Wife moved to CA with kids. While on
business in CA, husband was served.
o Good law because you don't need MC if there is presence
Goodyear - Tire and wrongful death suit
o The EU & US tires are the same but court stated they are different companies.
o Can only be sued at the PPoB and where they are incorporated or presence Must have MC
Is there Personal Jurisdiction? (Questions to ask).
1. Present? - If present, there is no need for a long arm statute, includes PPoB, Inc., and
Person.
2. Notice? - Long arm statute
3. IR - Property? 4. QIR? - Does it have something directly to do with property?
o Does not include QIR IIB actions.
5. Has there been consent? - PJ may be waived
6. Is the suit so related to an action within that state?
o Does the person/place
o Intentional act?
o MC + PA?
Venue and Appeals
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VENUE
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1391 a, b, c2, d are the venue rules
o B1 & B2 operate together and simultaneously
 Can choose any venue that falls under 1 or 2
o B3 only operates if no venue under B1 & B2
o D - If a state has multiple districts, each district is treated as their own state
 If Inc. in a state that has multiple districts - any one of the districts can be
the proper venue
o 1404 - Move venues - Correct to Correct
 FNC - Original correct venue CoL rules apply
 1406 - Move venues - Incorrect to Correct
 FNC - The Correct venues CoL rules apply
 Choice of Law Rules - determines which jurisdiction's substantive laws will be applied to
the case.
 Forum Non Convenience - FNC
 Can dismiss if the forum is not convenient
 CL doctrine - On court's discretion
 Ex: FL is proper forum/venue but all witnesses, evidence, ect., is in Kazakhstan
 To prevent FNC - the foreign court's remedy has to be nonexistent. Not just
severely diminished.
 Piper  Removal Cures all Venue Defects (because it's the defendant that removes
instead of moving for dismissal for improper venue)
 Piper - filed a 1404
 Piper did enough business in to have MC in CA. Thus, it was a correct
venue to begin with and a 1404.
 Hartzell - filed a 1406
 Hartzell did not do business in CA and did not meet MC. Thus, it was not
the correct venue and a 1406 was necessary.
 Private v. Public interest factors.
APPEALS & COLLATERAL ORDER DOCTRINE  Final judgements necessary for Appeals - a judgement which ended the litigation on
the merits
 FRCP 58 - every judgement must be set out in a sperate document
 Rule 4 (Appeal as of Right) - 4a4A - doesn't necessarily need a separate document &
the clock starts when the last document is entered by the court.
o If an appeal is filed before the final judgment is entered, the clock starts when
the judgment is entered.
o Rule 50 motion granted - clock on the appeal begins when court order is
entered
 Multiple appeals - 4a1 & 4a3 - which ever would be longer
 Generally parties have 30 days to file a notice of appeal with the district court.
 Collateral Order Doctrine - 1292
o A final judgment is a judgment which ends the litigation on the merits
o The collateral order doctrine is a COMMON LAW exception to the final
judgement rule and reflects the Supreme Court's recognition that some orders
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which do not meet his classification are nevertheless immediately appealable
under 1291
There is a three prong test for whether an order or a ruling satisfies the
collateral order doctrine. These prongs are:
a. The order must conclusively determine the disputed questions
b. The order must also resolve an important issue completely sperate or
collateral from the merits of the action
c. The order must be effectively unreviewable on appeal from a final
judgment or the harm done cannot really be repaired if we wait for it to
be addressed on appeal
Cohen - Shareholder suit case NJ
a. 2 issues at question:
1. Does the district court have jurisdiction because of the decision of
NJ law not applicable is not a final judgment
2. Diversity Action - does the NJ bond law apply (Erie Question)
a. Yes - the order established that there is no bond
b. Completely different issues
c. Main issue - Did the corp. breach the fiduciary duty?
d. Collateral issue - Should a bond be posted
e. Discretionary - the purpose of the statute requiring the bond is
to prevent litigation so if an appeal is allowable a trial has
happened which the law was supposed to prevent. There
shouldn't have been a trial - not an effective remedy if there
should have been no trial and thus no appeal to put up the
bond.
In Cohen, the Supreme Court mentions that this type of appeal
belongs to a "small class" of decisions and in Mohawk the Supreme Court
reiterates that the calss of collaterally appealable orders must remain "narrow
and selective in membership."
Mohawk - Attorney Client Privilege Issue
 c) is being argued - materially that is forced to be disclosed cannot be
unseen, but the matter can be appealed and if erroneously given, the
appeals court would grant a new trial without that discovered material so
no collateral order.
 The court is hesitant to include more (beyond what is included in 1292)
because the court should probably not expand the statute because they
were given a statutory avenue to use.
 Because they have 1292 Common Law should be used with extreme
caution/hesitance and use the statutory law provided to them
Examples
 Considered appealable under Collateral Order Doctrine:
 Orders denying claims of governmental immunity from suit asserted
in a motion to dismiss or motion for summary judgment
 *Abstention-based stays dismissal and remand orders note some
courts also say that these are final orders
 Orders deciding that plaintiff is not required to post security for
costs. Cohen
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Orders denying appointment of counsel to litigants who can’t afford
counsel
 Considered NOT appealable under Collateral Order Doctrine:
 Orders denying motions to stay or abstain
 Orders denying certification of a class action
 Orders denying a motion to disqualify counsel
 Orders granting motions to disqualify counsel
1292(b) - permits district trial judges to ask appellate court to rule on a
non-final order (certification). Trial Judge may seek certification on a ruling that
may differ from the general rule
 Only in civil actions
 Legislative history - trial judges wanted it
 Appellate courts have absolute discretion whether or not to rule
*Abstentions - the court choosing, at its own discretion, to not hear a
case
 Pullman Abstention Unsettled state law, not previously interpreted by state courts
State law issue must potentially be dispositive
Usually stays the federal action
Postpones federal court trial action
 Burford Abstention State law need not be unsettled
Not necessary that state law be dispositive, just that an
established procedure and regulatory scheme which the state is the
ninja expert at, exists to try to resolve the case
Usually results in dismissal because state courts are usually
better equipped to hear the action since it involves a unique area of
complex state law. Thought to be better the federal courts have
appellate jurisdiction.
Prevents federal court trial action
Interlocutory Appeals Act
Review under the Interlocutory Appeals Act [28 U.S.C. §1292] is
discretionary and may be available when: (i) the trial judge certifies that the
interlocutory order involves a controlling question of law, as to which there is
substantial ground for difference of opinion, and immediate appeal from the
order may materially advance the ultimate termination of the litigation; and (ii)
the court of appeals then agrees to allow the appeal. A party obtaining such a
certificate from the trial judge must, within 10 days, apply to the court of
appeals, where two out of three judges must agree to hear the appeal.
Collateral Order Rule
If the claim or issue is separable from and collateral to the main suit and
is too important to require deferring appellate review, it may be classified as a
judgment in a separate (“collateral”) proceeding and thus be appealable.
[Puerto Rico Aqueduct & Sewer Authority v. Metcalf & Eddy, Inc., 506 U.S. 139
(1993)—governmental entity’s claim of Eleventh Amendment immunity from
suit denied; issue appealable immediately under collateral order rule because
failure to permit interlocutory appeal would effectively eviscerate Eleventh
Amendment immunity from suit in federal court by requiring entity to litigate to
final judgment before appealing]
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RIGHT TO TRIAL JURY  Right to a jury trial comes from 7th Amendment (Constitution) and FRCP 38
 Historically it has been split into 2 categories - Law and Equity claims in different
courts
o Now, FRCP 2 makes all actions civil actions in 1 federal court
 Beacon
o Declaratory Judgment Act allows claims to be brought under 1331 even if the
Federal Question would come as a defense or counter suit. (A way around the
Well Pleaded Complaint Rule). To prevent damages from continuing to rise, the
suit may be brought. 100% on the courts discretion.
o Fox had no Federal CoA until Beacon brought it as counter suit for violating
Antitrust laws.
 The district court wanted to hear the declaratory judgement (equity)
before the antitrust (legal) claim which the equitable decision could have
robbed Beacon of their right to a jury trial if the DJ claim was decided
against them.
o An equitable claim cannot prevent a jury trial.
 Dairy Queen - Similar to Beacon
o Franchisee missed payments to use DQ. DQ wants an accounting w/ judgement
and injunction for the difference.
o The equitable claim may not prevent constitutional right to a jury trial. Claims
at law must be decided first even if it will impede the equity claim. (But does
not state there could never be a time where an equity claim might have to be
heard before a claim at law).
Res Judicata & Collateral Estoppel
 Res Judicata or Claim Preclusion
o Bars litigation of claims/defenses arising out of the same transaction and
occurrence in a subsequent action after a final judgement on the claims
 Elements (need all):
1. Final judgement
2. On the merits
3. Attempting to litigate same claim from previous action in another
action or attempting to litigate claims that should have been
brought in previous action
4. Same parties in second action or parties in privity with each other
o Judicial Doctrine - kind of covered by FRCP 13 Compulsory CC
o Final judgement on the merits necessary
 Jury trial and verdict
 12b6 - May be granted leave to amend (process could be repeated
indefinitely) or if 21 days lapsed
 Failure to prosecute - Rule 41
 Default Judgements
o Purpose - a way to avoid inconsistent outcomes and to give integrity to Final
judgements
 Avoids repetitive harassment of a defendant
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FRCP is flexible to amend and join so if it could/should have been brought
the chance is probably waived
o RJ prevents a collateral attack of the final judgement instead of a direct attack
(like an appeal).
 Appeals should be the only way through a final judgement
o Factors for RJ:
 Same case (theory) with no new facts - same parties and facts
 Different case title but same case with the same facts (i.e. negligence v.
strict liability design w/ the same facts and same parties)
 Same Operative Facts/Same Occurrence and the claim should have been
joined with previous claim (FRCP flexible)
 Future Damages - Depends on jurisdiction/court - the damages asked for
should probably include future damages and thus there would be no need
to retry the suit with new findings. It also prevents the injured party from
constantly keeping the defendant on the hook for every little thing that
might pop up.
 Lack of SMJ - Depends on court. Some jurisdictions believe it goes against
the finality of the judgments but at the same time courts need to have
SMJ and lack of SMJ can be raised at any time.
o Factors for continuing second litigation/ not granting RJ:
 Different suits/claims (i.e. negligence claim w/ awarded damages & then
execution of judgment claim)
o Manego - Disco Case
 Manego doesn't get permits he applies for. First suit is based on racial
discrimination and M has no evidence and SJ is granted. Second suit is
based on Antitrust claims. Court ruled Res Judicata and couldn't be hear
because it was 1) the same case, 2) one added party but no new facts, and
3) the ballroom permit was available to be discovered (granted 3 days
prior to close of discovery) so they should have been diligent and
discovered it. Suit blocked by Res Judicata
o Marresse - Doctor/Antitrust Case
 Doctor denied entry into doctor club. Filed suit in Illinois for state claim
and state court dismissed. Doctor then filed suit in Federal court for an
exclusive federal claim.
 If a claim is exclusively a federal claim, it cannot be barred by RJ for not
being brought with state claims in state court
1. States could in theory RJ the claim away, but that would be big to
say someone couldn't bring a federal claim in federal court
 The preclusive effect of a state law judgement on a subsequent federal
court action is determined by state law
1. Most states - RJ does not apply to exclusive federal actions
 Full Faith and Credit - Binds federal courts to state court decisions but
does not bind state courts to federal court decisions (exception being
SCOTUS)
 Issue Preclusion or Collateral Estoppel
o Bars relitigation of issues in a subsequent action if they have already been
litigated in a previous action even if the identical issues come from different
transactions and occurrences
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Elements - Need all 4(or5):
1. First case ended in a final judgement on the merits
 Same as RJ
2. Same issue in first case and second case
3. Issue must have been actually litigated and decided in the previous
action
4. The Litigation of the issue must have been actually necessary to the
courts judgment
5. Same parties most of the time?
Changes in a rule of law changes the issue. If the issue changes (new issue) it
cannot be precluded.
Little - Bus Crash Case (Actually litigated and decided #3)
 Suit 1 negligence/property damage - Bus (wins) v. Little (in small county
court)
 Suit 2 willful negligence - Little/Executor v. Bus
 Because IL was a contributory negligence jurisdiction and the first
suit proved that Little was at least a little negligent, he could not
collect on the second claim
 Can't have a lot of negligence without a little negligence
 Thus all 4 elements of CE were satisfied
Hardy - Asbestos Case
 Suit 1 - Borel (insulator)
 Insulator brought negligent failure to warn case. (Won)
 Issues Decided:
i.
Unavoidably unsafe
ii.
Cause of mesothelioma and asbestosis
iii.
No warnings were issued prior to 1964
iv.
"Warning Standard" was not met
 Suit 2 - Hardy (pipefitters, carpenters, insulators, ect.)
 Sue for strict liability failure to warn after Borel
 Parties are different from the first suit - riding the coattails of Borel
 If the court cannot establish it is the same issue, then it cannot be
precluded (same idea as if it were a new issue)
 Failure to ward & Inadequate warning - are two different
causes of action
 It becomes a different issue because of the different people
(in this case). The warning is likely found on the insulation
itself and so the insulator has adequate warning (Borel).
 The 2nd suit, people down the line, such as pipefitters and
carpenters, are affected instead of just insulators making it a
different issue that cannot be precluded.
 It is very, very difficult to determine if it is the same issue
Mutuality
 Suit 1 - A v. B
 Suit 2 - A v. B (or C v. B is A & C are in privity and viewed as the same
party)
 Non-Mutual CE - different parties
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Can be used offensively or defensively (Only NMCE can be used
offensively)
Taylor
 Dude files FoIA request and is denied. Dude 2 (Dude's friend) files same
request.
 Privity - 6 types of relationships (Virtual Representation)
 If in privity - they are treated as if they are the original party
 Privity = a way to make Mutuality
 Agree to be bound by judgment (efficiency)
 Property owner v. Person for easement. If land is sold, the new
owner is bound to the outcome of the previous case about the land.
 Adequately represented persons
 i.e. class actions, suits brought by fiduciaries, and executors
 Manufacturer 1 v. Retailer (for patent infringement). Retailer got
goods from Manuf. 2, who produced goods and has a stake in
outcome so they give $ to Retailer.
 Attempts to relitigate via proxy.
 Widow and sole beneficiary loses a suit against company
seeking damages alleging husband died bc of company's
negligence
 Then estate sues alleging the same
 Probate and In Rem suites
 If you have a claim but do not show up, then it is conclusive
Halpern - Bankruptcy Case
 Suit 1 - Forced into Bankruptcy for 3 different reasons - any one of which
would have been sufficient.
 The 3 Bankruptcy factors
 Intent to hinder or delay creditors
 Favoring one creditor over another
 …
 Suit 2 - Halpern filed to discharge the bankruptcy but the Trustee blocked
it because of factor #1 (which is the only factor that can be used to
prevent the discharge of bankruptcy).
 The appellate court found that because the trial court found all
three reasons, no single reason was "necessary" pursuant to
element 4.
 "intent to hinder or delay creditors" must be found to prevent
discharge. It must be found necessary to the judgment in order for
it to be precluded. Because all 3 were found no single factor was
absolutely necessary pursuant to element 4.
 If it was unnecessary to resolve an issue in the previous trial, then it
cannot be preclusive I the second trial.
 When there are alternative basis' for a ruling, then each basis is not
necessarily given the attention or weight it deserves. When all 3
were found, one individual factor is not "actually necessary" to the
judgement.
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This is especially important in Bankruptcy because bankrupt
litigants may not have the resources to fully litigate their
claims. It is just a barebone resolution of issues.
Contributory Negligence Jurisdiction. P v. D, D uses contributory negligence as a
defense and wins.
 D can win 2 ways - so if not explicitly stated which, neither is "actually
necessary" to the litigation just as in the bankruptcy case
 If plaintiff was negligent - Defendant wins
 If defendant was not negligent - Defendant wins
 P can only win 1 way
 Both are actually necessary because the plaintiff must not be
negligent & the defendant must be negligent
The general rule therefore is that you are only bound by a judgement unless
you were a party to the litigation in which the judgement was rendered except
in the six situations above
 Non-Mutual Example (exception to general rule):
 A v. B - rent not paid and the court rules lease is unenforceable and
thus rent cannot be forced
 A v. C - for rent not paid and C uses A v. B as a shield or defense
(NMCE)
 D v. A - to recover rent paid under the unenforceable lease as a
sword or offense NMCE
Bernhard - CE without Mutuality - Bank Case
 Suit 1 - Beneficiary v. Executor (Executor wins)
 Suit 2 - Same Beneficiary v. Bank (court allowed the bank to CE the
beneficiary from relitigating the ownership of the money)
 NMCE because it was the same issue being precluded but the
parties were different and not in privity (used a a shield)
 NMCE was allowed because the estopped party had a full and fair
opportunity to litigate the matter - Tried to relitigate to get new
judgement
Blonder-Tounge - University & Patent Case
 University of IL sued someone for patent infringement and lost because
the patent was invalid. Then Uni IL sued someone else but because they
had an opportunity to litigate the matter, the 2nd defendant was able to
NMCE (used as a shield)
 Could have also used RJ
 In some cases, Issue Preclusion and Claim Preclusion may be used
interchangeably so long as the proper elements are met
Parklane - Pantyhose and SEC Case
 Suit 1 - SEC v. Corp - about materially false and misleading statements
regarding a merger
 Shareholders cannot joint SEC suits
 Suit 2 - Stockholders v. Corp - seeking rescission of merger and recovery of
$ basis that corp. issued a materially false and misleading statements
(used Suit 1 as a sword against corp.)
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
Offensive use of NMCE is not precluded as a matter of law and may be
permissible when joinder of the person in the 2nd suit was inconvenient
or impossible in the 1st action and it would not be unfair to the
defendant (Have to look at the weight of the evidence. I.e. the Hulk
example. If he half-assed the $100 case, it would be unfair to hold him to
that outcome with a $100 Million case)
 Sometimes NMCE can be used as a sword
Factors relevant to permitting NMCE:
 Whether the estopped party had a strong incentive to litigate in the
suit (aka preventing shareholder suit)
 Whether procedural opportunities to raise the issue are equal in
first and second suits
a. Both cases were in federal court so had opportunity
 Prior inconsistent judgments
a. No prior inconsistent judgments
 Prevents freeloaders - should plaintiff have joined in 1st suit
a. Shareholders are not allowed to join SEC suits so in this case
offensive use is okay
b. Necessary for offensive use
 If 1+2+3 = good to use as a defense
 If 1+2+3+4 = good to use as an offense