Preclusion. This complex issue deserves another blog post. As we have touched on, the two types of preclusion (claim and issue) have different requirements.
Claim preclusion bars re-litigation of a claim altogether where a second suit involves: (1) the same cause of action (2) between the same parties [or those in privity with them] (3) after a final judgment on the merits in the first suit.
In contrast, issue preclusion prevents a party to the first lawsuit, or one in privity with a party to the first lawsuit, from re-litigating issues that were actually litigated and conclusively resolved in the first lawsuit. Unlike claim preclusion, issue preclusion does (1) not bar entire causes of action, but prevents re-litigation of previously decided issues and (2) can be raised by one who was not a party or privy in the first suit.
Stated again, claim preclusion focuses on preventing a suit from being brought again on a legal cause of action that has already been finally decided between the parties. Issue preclusion bars the re-litigation of factual issues that have already been necessarily determined by a judge or jury as part of an earlier claim.
Here are a few examples:
Claim preclusion. A losing plaintiff is barred from re-suing a winning defendant on the same cause of action. An illustrative scenario would be Plaintiff Johns unsuccessfully sues Defendant Douglas for breach of contract. Plaintiff Johns may not try for better luck by initiating a new lawsuit against Douglas for breach of the same contract.
Merger. A winning plaintiff may not re-sue a losing defendant. In this scenario, Plaintiff Johns successfully sues Defendant Douglas for breach of contract but is only awarded 1/3 of his damages. Plaintiff Johns may not sue Defendant Douglas for breach of the same contract again, to try and recover more damages.
Issue preclusion. Once an issue of fact has been determined in a proceeding between two parties, the parties may not re-litigate that issue even in a proceeding on a different cause of action. In this type of scenario, Plaintiff Johns sues Defendant Douglas for breach of contract. Then Plaintiff John sues Defendant Douglas on a second breach of contract. However Element E (no valid assignment), which was determined in the first trial, is common to the first breach of contract and the second breach of contract. At the second trial, Plaintiff Johns and Defendant Douglas cannot attempt to get a different disposition of Element E.
There are limited exceptions to res judicata that allow a party to attack the validity of the original judgment, even outside of the appeals process. These exceptions-usually called collateral attacks-are typically based on procedural or jurisdictional issues, based not on the wisdom of the earlier court's decision but its authority or competence to issue it.
Accordingly, only claim preclusion bars claims that could have been raised in the first proceeding; issue preclusion requires actual litigation of issues. Noble v. Draper (2008) 160 Cal.App.4th 1, 11. Whereas res judicata (claim preclusion) bars claims that could have been raised in the first proceeding regardless of whether or not they were raised, collateral estoppel (issue preclusion) strictly bars issues that were actually and necessarily decided in the earlier litigation. Murphy v. Murphy (2008) 164 Cal.App.4th 376, 401. A former judgment is not a collateral estoppel on issues which might have been raised but were not.
In DKN, DKN leased commercial space to three lessees. The lease provided that the lessees had joint and several responsibility to comply with the lease terms. One of the lessees sued DKN for breach of contract, among other causes of action. DKN cross-complained for rent and other monies due. All lessees were originally named in the cross-complaint, but only the plaintiff was served. The other two lessees were dismissed without being served. After a bench trial, the court rejected the plaintiff's claims and awarded $2.8 million on DKN's cross-complaint. Before the statement of decision was filed, DKN sued the other remaining lessees in a separate action. One of those lessees demurred, arguing that, because DKN's rights under the lease had been adjudicated in the previous action, the suit against the remaining lessees was barred by claim preclusion. The trial court sustained the demurrer, and the Court of Appeal affirmed.
On appeal, the Supreme Court of California held that claim preclusion did not apply. Because claim preclusion only bars repeated claims for the same relief between the same parties, a judgment in an action does not bar a judgment in a later action alleging the same claim of wrongdoing as long as the suits are against different parties. Only a satisfaction of the contractual obligation would bar DKN from suing the remaining lessees. Here, because the judgment from the first lawsuit had not been satisfied when the second suit was filed, the second suit was permissible.
It is often difficult to determine which, if either, of these apply to later lawsuits that are seemingly related, because many causes of action can apply to the same factual situation and vice versa. The scope of an earlier judgment is probably the most difficult question that judges must resolve in applying res judicata. Sometimes merely part of a subsequent lawsuit will be affected, such as a single claim being struck from a complaint, or a single factual issue being removed from reconsideration in the new trial.
For more information on these and related legal issues, contact commercial collection attorney Ronald P. Slates today.