Concept
When Preclusion Gives Way
Claim preclusion
When Preclusion Gives Way
Claim preclusion sometimes fails even when every element is met: a valid and final judgment on the merits, between the same parties, on the same claim. The elements are easier to satisfy than they sound, since a summary judgment or a Rule 12(b)(6) dismissal counts as a judgment on the merits, and a plaintiff whose first case ended that way cannot simply start over.1 That leaves the plaintiff looking to the exceptions that Restatement (Second) of Judgments § 26(1) collects.2
Section 26(1) names six situations in which courts refuse to apply the doctrine although its elements are satisfied. The parties may have agreed, in terms or in effect, that the plaintiff could split the claim, or the defendant may have acquiesced in the split. The first court may have expressly reserved the plaintiff's right to maintain the second action. The plaintiff may have been unable to rely on a theory in case one because of limits on the first court's subject matter jurisdiction.3 The first judgment may have been plainly inconsistent with the fair and equitable implementation of a statutory or constitutional scheme, or the sense of the scheme may be that the plaintiff should be allowed to split the claim. Substantive policy in a case of continuing or recurrent wrong may have given the plaintiff the option to sue from time to time, and the plaintiff may have taken it. Last, an extraordinary reason, clearly and convincingly shown, may overcome the policies that favor preclusion.4
Two further limits fall outside the six. A claim built on facts that arose after the first suit is a new claim from the start, because a judgment decides only the dispute as it stood when the court entered it. The defense can also be forfeited: a defendant who does not raise it loses it, however clearly the elements are met. The first limit turns on what the first judgment could reach, and the last turns on what the defendant did in case two.
The list follows from the reason the doctrine exists. Claim preclusion bars grounds that the claimant raised or could have raised in case one, and the corollary is that a ground that could not have been asserted is not barred.5 Each exception removes part of that premise. Where the first court lacked authority to hear a theory, the ground was never available. Where the defendant agreed to the split, or the first court reserved the claimant's right to sue again, the party or tribunal that would otherwise enforce the bar has approved the second suit, and holding the split against the claimant would contradict that approval. Where a statute, a constitutional scheme, or a substantive rule about recurring harm points toward more than one suit, a more specific judgment about how that kind of dispute should be litigated displaces the general preference for finality.
The exceptions are narrow, and the catch-all shows how narrow: it demands a clear and convincing showing of an extraordinary reason.6 A claimant who regrets omitting a ground from case one, or who thinks the first result was unfair, has identified no exception, because the doctrine accepts those costs in exchange for finality.
When case one was decided in a state court, the exceptions come from that state's preclusion law. Section 1738 of Title 28 gives a state court's judicial proceedings, in every court in the United States, the same full faith and credit they have by law or usage in the courts of that state, so the court in case two consults the rendering state's rules.7 A later section develops that point. The first limit below mirrors the doctrine's rationale most directly: a claimant could not raise a ground in case one because the first court lacked authority to hear it.
Limited First-Forum Authority
Restatement (Second) of Judgments § 26(1)(c) lifts the bar when the claimant “was unable to rely on a certain theory of the case . . . in the first action because of the limitations on the subject matter jurisdiction of the courts.”8 The exception applies the doctrine's own premise. A cause of action that could not have been asserted in the first action is not barred,9 because a claimant who could not carry a theory into the first forum forfeited nothing by leaving it out. Applying the bar anyway could leave the claimant with no tribunal in which to assert the claim.10
The exception stays narrow because liberal joinder rules let a plaintiff join all theories of recovery in the first suit, so a plaintiff will seldom be able to argue that an omitted claim was out of reach.11 The inquiry looks at the first court's power to hear the claim. The claimant's preference for another forum, the difficulty of the claim, and the chance that the court would have declined it count for nothing. Three settings show the exception at work (exclusive federal jurisdiction, tribunals of limited remedial power, and administrative agencies), and River Park, Inc. v. City of Highland Park then marks its edge.
Suppose a plaintiff loses a state-law antitrust claim in state court and then sues on the same facts under the federal antitrust laws. The parties match, the first judgment is final and on the merits, and both theories rest on the same conduct. Federal courts have exclusive jurisdiction over antitrust claims, however, so the state court could not have heard the federal theory, and the second action is not barred.12 Patent claims work the same way. Allen sues Moser in state court under a state unfair competition statute, and the same conduct may infringe a patent, a claim within exclusive federal jurisdiction. Allen could not have joined the patent theory in the state action, so he will usually remain free to assert it later.13
Exclusive federal jurisdiction is one instance of a wider rule: if case one took place in a court of limited jurisdiction, claims that could not have been presented there are not barred.14 Workers' compensation cases show the rule most clearly. In Thomas v. Washington Gas Light Co., a worker who had collected an award under one state's compensation plan sought benefits under another jurisdiction's plan, and the Supreme Court permitted the supplemental recovery. The Court had once treated a compensation award like an ordinary judgment, in Magnolia Petroleum Co. v. Hunt, but Industrial Commission of Wisconsin v. McCartin recognized that these awards are special. They come from tribunals with power to grant only particular remedies, and a compensation statute will not be read to prevent supplemental recovery in other states without “unmistakable language.”15 A commission with that limited power never had the chance to decide a claim outside its remit, so its award does not close off everything the worker might claim elsewhere unless the legislature says so clearly.
Administrative proceedings follow the same logic. Suppose a state statute requires all employment discrimination claims to be filed with a specialized agency whose jurisdiction is limited to such claims. A fired employee files her discrimination claim there, as the statute requires, and the agency rejects it on the merits. She then sues in state court for breach of contract based on the same termination. Under the transactional test the two claims are one, because both arise from the termination, and the parties and the final merits judgment match. The exception applies anyway. She had no choice about the forum for the discrimination claim, and the agency lacked jurisdiction over the contract claim, so without the exception she might have no tribunal in which to assert it.16
Whether the first forum could have heard a claim is a question of power, and a court's discretion to decline a claim does not remove the power. In River Park, Inc. v. City of Highland Park, plaintiffs who had sued in federal court later asserted state-law claims and relied on § 26(1)(c), arguing that the federal court would have lacked jurisdiction over those claims.17 The court rejected the argument. Federal courts may exercise supplemental jurisdiction over claims that are part of the same case or controversy as a claim within their original jurisdiction, and because the plaintiffs filed no state claims in federal court, no one could know whether the district court would have declined to hear them. Federal courts had also exercised supplemental jurisdiction in similar circumstances, so the state claims were claims that could have been decided in the federal suit.18 The plaintiffs complained of a Catch-22, and the court answered that they created it themselves when they chose not to assert their state claims in the federal action.19
Set beside the antitrust illustration, River Park shows what the exception turns on. The state court in the antitrust illustration had no power at all over the federal claim. The federal court in River Park had power over the state claims and discretion to keep them. A discretionary power that the claimant never invoked is still a power, and the bare possibility that a court might have declined jurisdiction does not bring a claimant within the exception. Because a federal court may exercise supplemental jurisdiction over claims in the same case or controversy as the federal claim, the exception seldom rescues a plaintiff whose first suit was in federal court.20
When case one is a state judgment, the exception does not operate automatically even for a claim the state court could not hear. In Marrese v. American Academy of Orthopaedic Surgeons, a federal court in case two faced a federal claim within exclusive federal jurisdiction after a state-court judgment. The Supreme Court held that, under 28 U.S.C. § 1738, the federal court must treat the state judgment as the state's own courts would, so it must ask whether the rendering state's preclusion law would bar the federal claim despite the state court's lack of authority to hear it.21 The state's law in Marrese did not bar the claim, but the analysis left room for a state whose law does. That result is surprising, because it shows that the fairness principle that a party may not be precluded from raising a claim the first court had no authority to hear is not required by the Constitution. A later Supreme Court decision involved a state rule that did give preclusive effect to a state-court decision on a federal claim within exclusive federal jurisdiction, and the federal court had to apply that rule.22 The antitrust illustration above states the usual result, and a state judgment adds the question what the rendering state's own law provides.
A common mistake is to treat any change of forum between case one and case two as proof that the claim could not have been raised. The River Park plaintiffs also started over in a different court, and they lost, because the federal court in case one could have heard their state claims. The question is whether case one's court had power over the omitted claim, and the identity of the second forum does not answer it.
Later Events and Changed Law
A judgment decides the dispute as it stood when the first court ruled, so the same-claim element leaves open whatever happened afterward. In Whole Woman's Health v. Hellerstedt, providers whose earlier challenge to Texas abortion regulations, Abbott, had failed brought a new challenge, and the Supreme Court held that res judicata did not bar it.24 The new claim rested on facts that had developed since Abbott. Restatement (Second) of Judgments § 24, comment f, supports that result: “Material operative facts occurring after the decision of an action with respect to the same subject matter may in themselves, or taken in conjunction with the antecedent facts, comprise a transaction which may be made the basis of a second action not precluded by the first.”25
The reason follows from what claim preclusion presupposes. The doctrine bars grounds the claimant could have raised in case one, and a fact that did not yet exist could not have been pleaded, proved, or argued. The Court put the point this way: when individuals claim that a statute will produce serious constitutionally relevant adverse consequences before they have occurred, and the courts doubt that those consequences will occur, the fact that they have in fact occurred “can make all the difference.”26 The first judgment answered a forecast, and the second suit asks about what happened, so the two are different claims. Courts of appeals draw the line at events that postdate the filing of the initial complaint, while the Restatement speaks of facts occurring after the decision of the first action, so a problem that places the new fact after judgment avoids the difference.27
Contract cases make the same point. A plaintiff who sues for one year's royalties does not yet have a claim for the next year's, and he cannot be expected to predict future defaults and sue on them before they occur. The separate breaches in successive years are different occurrences that may be sued on separately, even though one contract is involved.28
A patent dispute shows the same line from the defendant's side. Suppose Jones sues Smith over widgets and loses because the jury finds that Jones does not own the patent. Smith later opens a second production facility making a variant, and Jones sues again. Claim preclusion looks to the same transaction or occurrence and serves the need for finality between the litigants, and a facility that did not exist when the first suit was tried is a different occurrence.29 Issue preclusion works differently. It concerns the efficient use of a court's factual determinations, so the earlier finding that Jones does not own the patent can still bind him.30 New facts therefore open a new claim, and they do not erase what the first court actually decided about the parties' relationship.
What should an exam answer say about a plaintiff who returns with a stronger record? The majority's reasoning points to new events, namely consequences that had “in fact occurred,” and not to better proof of old events.31
The Whole Woman's Health dissent argued that the earlier litigants should have sought review in the Supreme Court, and the majority answered that failing to seek review does not stop litigants from pursuing new claims that arose after the earlier decision.32 That answer reaches only a second suit built on something new. A litigant whose second suit presents no development has nothing for the answer to attach to, and after a first-round loss the proper course is appeal.
Changes in the law are treated differently from changes in the facts. Once a final judgment has been entered and any appeals are over, not even a later change in the applicable law prevents claim preclusion from operating, and it does not matter that the losing party would win if allowed to start again under the new rule.33
The rule protects the stability that judgments exist to supply. Claim preclusion gives parties finality and lets them rely on the resolution of their dispute so as to order their affairs.34 Precedent shifts in cases that other litigants bring and carry through appeal, and if each shift reopened every final judgment that rested on the old rule, no litigant could rely on a judgment until the law stopped moving. A loser who believes the governing rule is wrong has a forum in which to say so, which is an appeal in case one. The treatment of a pending appeal confirms how seriously the doctrine takes the first judgment. A court asked to give a judgment preclusive effect while it is on appeal may stay the second action, which is the sounder practice because it avoids binding the parties to a judgment that may prove erroneous, but it has discretion simply to apply res judicata and dismiss.35
A narrower line of authority addresses what a changed situation does to a judgment's effect going forward. Courts recognize an exception to the usual prospective operation of res judicata when an intervening decision or change in the law has created an altered situation, and the Supreme Court relied on that idea in Herrera v. Wyoming, an issue-preclusion case in which an intervening decision had repudiated the earlier ruling on which preclusion depended. The baseline rule and the exception answer different questions. The baseline asks whether a loser may reopen the same past dispute because the law moved, and the answer is no. The exception asks whether the judgment may keep governing the parties' future dealings after the facts or law that supported it have changed. Even when it applies, the original judgment stands, so the exception neither reopens the first case nor revives the original remedy. An answer should state the baseline rule first and present the exception as a limited qualification on prospective effect.
As elsewhere in this chapter, a state judgment carries the rendering state's preclusion law with it, because 28 U.S.C. § 1738 gives it in other courts the same full faith and credit it has in the courts of that state.36
Agreement or Reservation
Two exceptions in Restatement (Second) of Judgments § 26(1) rest on consent. Under clause (a), claim preclusion yields when the parties have agreed, in terms or in effect, that the plaintiff may split the claim, or when the defendant has acquiesced in the split. Under clause (b), it yields when the court in the first action has expressly reserved the plaintiff's right to maintain the second action.38 The exception for limited first-forum authority depends on what the claimant was able to do in case one. These two depend on what someone other than the claimant did: the defendant, whose protection the doctrine exists to supply, or the court, whose judgment fixes how much of the dispute has been decided. A plaintiff's private hope of suing again appears nowhere on that list.
Claim preclusion protects a defendant's reliance on the first judgment as the end of the dispute, and each of these exceptions removes the basis for that reliance. A defendant who agreed to the split cannot say the first suit was expected to settle everything, and repose is an interest the defendant is free to give up. The words “in effect” carry clause (a) beyond a signed stipulation to an understanding shown by what the parties did, and acquiescence covers a defendant who accepts the split without any formal agreement. A reservation works for a different reason. A judgment decides what the court says it decides, so a court that states in its judgment that a described claim remains open has told everyone, the defendant included, that the first case ends less than the whole dispute. Requiring the reservation to be express makes it something the defendant can read and answer, instead of an understanding discovered after the second suit is filed.
The instinct that loses points is to treat the plaintiff's own plan as enough.
A plan the defendant never learned of gives the defendant nothing to rely on, nothing to object to, and nothing to accept. Honoring a plaintiff's private intention would also let every claimant keep a second suit in reserve, since any claimant could say afterward that the plan had been there from the start, and the rule against splitting a claim would lose its force.
What the exceptions do honor is consent that the defendant or the court actually gave.
The contractor's plea would contradict the contractor's own promise, and that is the reason the exception exists. A reservation by the court accomplishes the same result from the bench. When the first court's judgment states that it is without prejudice to the plaintiff's right to sue later on a described related claim, the later suit goes forward, because the court that entered the judgment has said what the judgment leaves open. The reservation must come from the court itself and must be express. A plaintiff's private plan, or a request for a reservation that the court never grants, is not a reservation by the court, and a judgment that says nothing reserves nothing.
These exceptions belong to the preclusion law of the court that rendered case one, so a state judgment carries them with it. Section 1738 gives a state court's judicial proceedings the same full faith and credit in every court in the United States that they have by law or usage in the courts of that state.39 A court in case two therefore asks how the rendering state treats a stipulation to split a claim, or a reservation written into its judgment, before deciding whether the bar applies.
On an exam, the question that sorts these facts is who consented. If the defendant agreed or acquiesced, or the first court expressly reserved the right to sue again, the exception applies. If the only evidence is what the plaintiff intended, hoped, or planned, the omitted claim is barred.
Overriding Policy
Three exceptions in Restatement (Second) of Judgments § 26(1) rest on policy, and they do not depend on the claimant's lack of opportunity or on anyone's consent. Clause (d) lifts the bar when the first judgment was plainly inconsistent with the fair and equitable implementation of a statutory or constitutional scheme, or when the sense of the scheme is that the plaintiff should be allowed to split the claim. Clause (e) applies when, for reasons of substantive policy in a case of continuing or recurrent wrong, the plaintiff has an option to sue once for the total harm, past and prospective, or to sue from time to time for the damages incurred to the date of suit, and chooses the latter course. Clause (f) reaches the case in which it is clearly and convincingly shown that the policies favoring preclusion are overcome for an extraordinary reason, such as the apparent invalidity of a continuing restraint having a vital relation to personal liberty or the failure of the prior litigation to yield a coherent disposition of the controversy.41
The exceptions taught earlier in this chapter each removed a premise of the doctrine's fairness: the claimant could not raise the ground, the facts did not yet exist, or the defendant or the court consented to the split. These three leave every premise in place and hold that a competing policy matters more. Claim preclusion buys judicial economy and repose for the parties, and when another public policy is weightier, economy gives way. Because economy and repose are real interests, the competing policy has to be specific and important, and the catch-all's demand for a clear and convincing showing confirms how limited these exceptions are.
Clause (d) treats claim preclusion as a general default that a scheme written for a particular kind of dispute can displace when applying the default would defeat what the scheme is meant to accomplish. Adams v. Pearson illustrates the reasoning from property policy. In a dispute over land in which buyer and seller each claimed title, the court refused to apply res judicata because the policies governing the transfer of property called for some determination of who owned the land. A bar that left ownership unresolved would undermine the certainty on which land transactions depend.
Students often treat the unfairness of the first result as itself a policy. Dissatisfaction with an outcome is the cost the doctrine accepts in exchange for finality, so an exam answer must identify the particular scheme or interest that the bar would defeat.
Clause (e) addresses a wrong that does not end. Ordinarily a plaintiff must bring all of one claim in one action, because the rule against splitting a cause of action forbids otherwise. A continuing or recurrent wrong keeps producing new harm from new wrongful acts, and for reasons of substantive policy the law governing it may give the plaintiff the option to sue once for the total harm, past and prospective, or from time to time for the damages incurred to the date of suit. The exception protects the plaintiff who chooses the second course.42 Requiring a plaintiff to put a price on all future harm from a wrong that might stop, grow, or be abated would force speculation, and the option avoids that.
The exception depends on the substantive law giving the option, so a plaintiff cannot invoke it merely by labeling a wrong as continuing.
Clause (f) is the catch-all, and its wording shows how narrow it is. The party seeking to avoid preclusion must show the extraordinary reason clearly and convincingly, and the two examples the clause offers are an apparently invalid restraint with a vital relation to personal liberty and a prior proceeding that failed to yield a coherent disposition of the controversy.43 Without that standard, every losing litigant would call the first result extraordinary, and the exception would consume the rule it qualifies.
The catch-all invites the argument that important personal interests justify a second look, and Whole Woman's Health v. Hellerstedt shows how that argument has been made. After concluding that new facts made the providers' later challenge a different claim, the majority added the Restatement's observation, from comment f to § 24, that where important human values, such as the lawfulness of a continuing personal disability or restraint, are at stake, even a slight change of circumstances may support a second action. It cited a court of appeals decision letting an as-applied challenge to an execution method proceed despite a prior facial challenge.44 The dissent objected that the sentence seemingly came out of nowhere, that no later court appeared to have relied on it as a ground for decision, and that the few decisions citing the human-values language invariably involve relitigation of personal status determinations.45
The two opinions leave a student with a measured position. The human-values language is real enough to cite and has been invoked where a dispute concerns a person's status or an ongoing restraint, but its authority beyond those settings is contested, so it supports a clause (f) argument only where liberty or status is directly at stake. The Whole Woman's Health majority also rested chiefly on facts that developed after the first suit, the subject of the preceding subsection, which makes the case a weak foundation for a free-standing human-values exception.
Because these exceptions belong to the preclusion law of the court that rendered case one, a state judgment brings them along. A state court's judicial proceedings receive in every court in the United States the same full faith and credit they have by law or usage in the courts of that state.46 A court in case two therefore asks whether the rendering state recognizes the policy exception being invoked before it decides whether the bar applies.
Waiver of the Defense
Claim preclusion is an affirmative defense, and a defendant who does not raise it in the manner Rule 8(c) specifies is treated by most courts as having waived it.48 An affirmative defense defeats the plaintiff's claim even if everything the plaintiff alleges is true, and the defendant must plead it because it rests on new matter outside the complaint. Claim preclusion fits that description exactly. The complaint in case two may be complete and well drafted, and the bar arises from something it never mentions, the judgment entered in case one.
The burden falls on the defendant because of who holds the information and whose interest is at stake. The judge in case two cannot learn that an earlier suit exists unless someone says so, and the defendant lived through case one and holds the judgment. The interest the bar protects is repose, and, as the discussion of consent showed, repose is an interest the defendant may give up. Some defendants would rather fight the second suit on the merits, and others forget the first. A rule that obliged the court to raise the bar on its own would force the protection on a defendant who might not want it and would leave the plaintiff guessing whether a defense was coming. A pleading tells the plaintiff what must be answered while there is still time to answer it.
Putting the earlier judgment before the court is the defendant's job, and it takes more than a passing mention. The defense rests on record material outside the complaint, much as a summary judgment movant files its supporting evidence with the motion. In one recreational-vehicle dispute, for example, the defendant submitted an employee's test report with its motion.49 A defendant who relies on preclusion likewise puts the first judgment into the record.
The usual exam error is to stop once the elements are met: a valid and final judgment on the merits, the same parties, and the same claim. Those elements show that the defense would succeed if it were raised, and they say nothing about whether it was raised. A preclusion defense is easy to lose this way because everything it needs is already in the record of case one, and the only step left is for the defendant to say so.
Pleading the defense preserves it and goes no further. How far the first judgment actually bars the second suit remains a question about the rendering court's preclusion law, and when case one was decided in a state court, 28 U.S.C. § 1738 gives that judgment the same full faith and credit in every court in the United States that it has in the courts of the rendering state.51 A defendant who pleads preclusion carefully but misjudges what the first judgment covers has therefore preserved a defense that still fails on its elements.