Issue Preclusion: What Is It?

Issue preclusion, also known as collateral estoppel, prevents someone from litigating an issue more than once. A similar concept, res judicata, prevents claims from being litigated again. Both rely on the idea that the claim or issue has already been decided in court.

These are both affirmative defenses, meaning the defendant claims that even if the plaintiff's facts are correct, the defendant cannot be held liable for different reasons. Other examples of affirmative defenses include laches — an unreasonable delay in making a claim — and statutes of limitation. If any party believes a claim or issue brought against them has already been litigated, they can argue that it cannot be litigated again.

Understanding Res Judicata

To decide these sorts of defenses in a res judicata case, which must be raised as an affirmative defense and not by motion, a court will consider three factors:

  • Whether previous litigations raised the same issues or claims — for instance, if two claims are based on the same occurrence or transaction.
  • Whether the same parties are involved in both actions, either directly or in privity, which means both parties share the same interests. For example, two people involved in the same car accident sue the guilty party separately.
  • Whether the original case had a final judgment based on the case's merits. This means the parties didn't settle on their own or the judge didn't resolve the case based on facts and evidence but on a motion or another reason, including dismissing the case.

With res judicata, neither a losing (bar) nor winning (merger) plaintiff can sue a defendant again on the same action or claim.

Understanding Direct Estoppel

Direct estoppel occurs when a defendant wins a judgment that's not based on the merits of the case. In this case, the cause of action for the plaintiff might survive the judgment, but parties cannot undertake subsequent actions or relitigate any issue that was previously litigated and determined by the court's judgment.

Why Is Issue Preclusion Important?

Issue preclusion is the same as collateral estoppel. In a collateral estoppel case, the claim might not have been litigated yet, but the issue at the heart of the claim has already been raised and litigated. The claimant must have had the complete, full, and fair opportunity to pursue and litigate the claim. It has a similar reasoning as res judicata, which is to prevent retrying issues that have already been settled, as presented in the U.S. v. Wells case from 2003.

Collateral estoppel has similar requirements as res judicata, but with important differences, including:

  • Issues raised must be identical to prior issues that were serious enough that they were heard and fully litigated before a court. The "could have been heard" test doesn't apply here.
  • The issue in question has to have been the subject of litigation. This means there has to have been a fair and complete trial.
  • The case must have had a final judgment, and the party against whom the estoppel is levied must have been directly or closely involved (in privity) with the prior issues. The judgment must not have been tentative, all parties must have been fully heard, and the decision must have been supported with reasoned opinions regardless of whether the decision was appealed and/or reviewed on appeal.

Some jurisdictions and some cases require privity to establish estoppel. This means the party against whom estoppel is claimed must have had a close relationship with another.

Prior litigation on a different action can be subject to issue preclusion regarding issues dealt with in prior actions. Sometimes, such as in the 1980 Allen v. McCurry case, the court doesn't allow claimants to vindicate federal rights based on estoppel. In this case, a defendant filed a motion to suppress evidence that was allegedly gathered in violation of their Fourth Amendment rights. The courts later allowed collateral estoppel to ban assertion of the same violation.

What Issue Preclusion Doesn't Cover

Issue preclusion does not stop litigations over issues that weren't litigated in the original proceedings. Even if those issues could have been raised, the estoppel only attaches if the issues were, in fact, brought up. This used to apply to only the parties involved in the original proceedings, but that rule has now been abolished. This was called the "strict mutuality of parties."

That's not been the case since 1993's Caldor Inc. v. Bowden case. Now, while no one can be bound by issue preclusion if they were not bound by prior litigation, anyone can raise issue preclusion as a defense. This is called nonmutual defensive collateral estoppel.

In nonmutual collateral estoppel, only the person against whom the issue preclusion is being brought has to have been involved in the original litigation. That is to say, they were the plaintiff in the prior case. It's designed to prevent retrying the same case twice, which is a core of the U.S. legal system.

Offensive Nonmutual Collateral Estoppel

There are arguments that the plaintiff can also use this kind of estoppel as a weapon against the defendant. The idea here is that a plaintiff can rely on issue preclusion to stop a defendant from relitigating an issue they lost in a prior case with a different plaintiff. Two cases have taken up this issue: Garrity v. Maryland State Board of Plumbing and Shader v. Hampton Improvement Association Inc., the latter of which was a review of the U.S. Supreme Court decision in the 1979 Parklane Hosiery Co. Inc. v. Shore case.

In this case, district courts denied a motion for summary judgment based on the idea that collateral estoppel would deny the defendant a seventh amendment right to a trial by jury. When the 2nd Circuit reversed the denial, the case proceeded to the Supreme Court. The Supreme Court considered a range of factors, including whether they should consider offensive and defensive uses of estoppel differently and the fact that strict mutuality had been relaxed in other cases.

The court recognized that there were both benefits and downsides to allowing offensive use of issue preclusion, but failed to take a firm stance and opted for a case-by-case evaluation so that future courts could decide when it could be used.

Later, in Rourke v. Amchem Products Inc., the courts ruled that the case had to be based on Virginia's preclusion rules, as it was a state case. In Burres v. Board of County Commissioners of Frederick County eight years later, the Court of Appeals denied the use of offensive issue preclusion.

Markman Hearings

According to the Supreme Court, district courts have to interpret patent claims' meanings. This generally means that judges can interpret these claims any time during litigation. They can hold special Markman hearings to interpret these claims. This has left district courts struggling to decide if a prior ruling from one court is binding when applied to another court. Generally speaking, if the standard four factors that serve as a litmus test are met, the issue preclusion defense applies.

Examples of Issue Preclusion Cases

The Garrity Case

In the Garrity case, the Consumer Protection Division of the attorney general's office found that Garrity had committed more than 7,000 violations of the Consumer Protection Act and engaged in unfair business practices. After this, the State Plumbing Board filed charges and collateral estoppel to bind Garrity.

Garrity petitioned for review and, when the courts upheld the decision, appealed to the Court of Special Appeals. The Court of Special Appeals, after hearing the arguments, embraced offensive estoppel when successive cases are brought by different administrative agencies, specifically between private and nongovernmental parties.

It further ruled that this case had no fairness concerns. Garrity, it stated, had plenty of incentive to defend the original proceeding, which was consistent with earlier judgments. The second case didn't offer any new procedural opportunities.

The Shader Case

Four months after the Garrity case, the Shader case hit the courts. This case revolved around whether a homeowner's association could prevent property owners from building a house on a vacant lot. The plaintiffs called for offensive estoppel based on a prior case where the association had waived its rights to enforce these agreements, which constituted abandonment.

The circuit courts denied the motion based on the idea that the prior issues differed from the current ones, ultimately ruling in favor of the HOA. The Court of Special Appeals affirmed this ruling. Further up the chain, the Court of Appeals also affirmed and granted certiorari — a review of the lower court's decision — observing that while other courts have called on offensive estoppel, it had not. In the end, however, the Court of Appeals said this case didn't apply, as it raised different issues.

In the end, these two cases leave the impression that the Court of Special Appeals will authorize offensive collateral estoppel, while the Court of Appeals neither embraces nor rejects the concept and has yet to take a firm stand on it.

Pelletier v. Alameda Yacht Harbor

In this 1986 case, appellate courts rejected issue preclusion on the basis that a prior detainer was resolved by a judgment when defense wasn't litigated fairly and fully and so wasn't conclusively established.

California State Auto Association Inter-Insurance Bureau v. Superior Court

In 1990, the courts determined that stipulated judgments can't receive collateral estoppel, particularly when parties intend to be bound by the terms of the judgment. This allowed the court to avoid conflicts with prior case law. This means consenting judgments aren't usually granted preclusive effect in later litigations unless the parties agree to allow it.

This particular case is also based on the 1969 cases of United States Fire Insurance Co. v. Johansen; Larsen v. Beekman; and the 1977 Ellena v. State of California. The courts have also upheld the idea that when a decision is handed down, any parties that consent to such a judgment can suffer collateral estoppel unless they reserve or withdraw those issues, as in 1982's In re Marriage of Buckley case; the 1988 Wittman v. Chrysler Corp case; and the 1970 Avery v. Avery case.

If an issue could not have been raised in prior proceedings, issue preclusion does not apply, as in the 1976 Chern v. Bank of America case and the Vella v. Hudgins case. Of course, if no issues were litigated, the stipulated judgment doesn't prevent further actions, as stated in Rappenecker v. Sea-Land Service (1979).

Phil-Insul Corp. (IntegraSpec) v. Airlite Plastics

This patent case that took place from 2011 through this year involved IntraSpec suing Reward Wall and Nudura Corp for infringement. The district courts found no infringement, a decision that was upheld on appeal. In the meantime, the United States Patent and Trademark Office confirmed several of the patent claims.

While this was going on, IntegraSpec filed suit against Airlite in 2012 for infringement. The case was dismissed based on issue preclusion. The ruling was that IntegraSpec was requesting a different claim in the new case than that which was awarded in the original one. Because the products were nearly identical and the claim construction in the initial case was narrow and critical to the outcome, the courts felt that nonmutual collateral estoppel applied.

TM Patents v. IBM

In the TM Patents v. IBM case, New York's Southern District allowed issue preclusion even in a case where a prior dispute was settled after a Markman hearing and didn't receive a final judgment. TM Patents had issued a claim against EMC, but settled out of court. Later, the same claim was brought against IBM, who held that issue preclusion should attach based on the prior claim construction. The courts held that the prior decision based on the Markman hearing was final and there was nothing left to decide regarding claim construction.

Further, the court reasoned that prior construction of the claim wasn't tentative, as the court's ruling was thorough and disposed of every disputed issue. Because that case's jury was not permitted to adopt different constructions, the case was granted a "special finality." A verdict, therefore, wouldn't have changed the claim construction. Finally, the courts ruled that because higher courts did not review the prior construction, TM Patents had cut off their right to review the construction by not appealing.

Kollmorgen v. Allen-Bradley and Yaskawa

In this case, Kollmorgen asserted two different patents against Allen-Bradley, which were construed in a long Markman hearing, and the case eventually settled out of court. Kollmorgen later asserted a similar claim against Yaskawa, who called for issue preclusion. In this case, however, the courts did not allow issue preclusion because the prior settlement was consensual, did not go to trial, and did not receive a final judgment.

In this case, the courts ruled that the inability to have the prior construction reviewed was fatal to the preclusive issue effect. They reasoned that to rule any other way would prevent future settlements and increase the number of appeals. Courts felt that the prior decision never touched on the issue of infringement or validity.

RF Delaware Inc. v. Pacific Keystone Tech

In this case, the Federal Circuit got involved in determining whether district courts were bound by rulings based on partial summary judgments from earlier actions that did not involve Markman hearings, if the case was settled outside of a formal trial.

Circuit courts determined that because issue preclusion is related to circuit law, they would apply 11th Circuit law to the case and held that in this case it did not apply. Their reasoning was that not only was there no final judgment but there was also no judgment, meaning the case did not meet the standard for finality. In addition, they stated there was no evidence that parties could be fully heard.

It did, however, hold that it's possible for preclusion to attach without a final judgment on a case-by-case basis, which left the door open for district courts to interpret future cases as they saw fit. The key factor is the extent and nature of the case in question — whether parties are fully heard and whether there is a full review of constructions.

Other Cases

Collateral estoppel as defined by 8th Circuit law can apply to a range of cases. For example, an insurance company might use similar provisions in many policies over several years and might litigate these issues across many policyholders or reinsured parties. The courts have a heavy responsibility in these cases, as their ruling can impact the way similar issues are resolved in later cases.

Two important cases illustrate the effective use of issue preclusion. These include Rainero v. Archon Corp in 2013, which allowed shareholders to prevent a company from disputing the preferred share prices when earlier lawsuits resolved this issue, and Fresh Prepared Foods Inc. v. Farm Ridge Foods LLC, which allowed the plaintiff to use collateral estoppel in a trademark infringement suit that was resolved in an earlier case the plaintiff wasn't involved with.

Patent-Specific Cases

Two rules are specific to patent cases:

  • Two infringement claims are the same if the products have essential similarities, such as being "merely colorable" or otherwise unrelated to the asserted claim limitations. In these cases, judgment can be used to support issue preclusion if only a single issue was appealed prior.
  • A person can be bound by estoppel if a prior case cancels a single claim and a later case asserts additional limitations. The rationale is that any claim terms must be consistently construed through a patent.

The Complexities of Estoppel

There are many rationales for estoppel, and the courts will decide each on a case-by-case basis. Pursuing these cases can be complicated. They require the very best legal counsel. If you're having problems dealing with an issue preclusion case, post your legal need on UpCounsel's marketplace.

UpCounsel's lawyers have graduated from some of the best institutions, including Stanford and Yale, and have represented Fortune 500 companies such as Google. They have an average of at least 14 years of experience.