Concept
Which Preclusion Law Applies
Issue preclusion
Which Preclusion Law Applies
A second lawsuit does not always land in the same court system as the first, and that raises a question the earlier sections could ignore: whose preclusion rules measure what the first judgment accomplished? As a general rule, American courts give a judgment the same preclusive effect the rendering court would give it.1 Call the court that issued the judgment the rendering court, and the court asked to give it effect the enforcing court. Suppose a Maryland court renders judgment in lawsuit #1, and the winner invokes it in an Illinois court in lawsuit #2. The Illinois court applies Maryland law to decide what the Maryland judgment forecloses.2 The rule is simple to state and easy to lose track of in the middle of a problem, so keep your eye on one thing: the preclusion law the rendering court would apply.3
The rule matters because court systems do not share one law of preclusion. Federal common law permits nonmutual offensive issue preclusion; most states do not, although many (not all) allow nonmutual defensive use. Some states give issue-preclusive effect to guilty pleas, while others require a conviction after trial in applying the “actually litigated” requirement. Some follow the Restatement (Second) of Judgments in giving no preclusive effect to alternative findings, and others give it to both.4 Courts also divide when a judgment may rest on different findings on more than one issue. The majority gives no estoppel to any issue unless evidence shows which issues were actually litigated and decided; the minority treats every issue as actually litigated.5 Any of these differences can decide a second suit, so the choice of law decides which version of the doctrine governs.
Looking back to the rendering court's rules also serves the parties. As soon as the judgment is entered, they know how far it will bar further litigation, and they need not wait to see where the second action is brought, because any court that hears it will apply the rendering court's rules. No one gains by filing the second action in a state with less restrictive rules of res judicata, so forum shopping loses its point.6
Where the rendering court's rules come from depends on what kind of court it is. State judgments come first, because the full faith and credit statute addresses them directly. Federal judgments follow, and their effect comes from federal common law, with a diversity exception that borrows state law. In both settings the method is the same: identify the rendering court, then ask what that court's law would do with the question the second case presents, whether it concerns actual litigation, alternative findings, mutuality, or any other point from earlier in this chapter.
State Judgments
Congress set the rule for state-court judgments in 28 U.S.C. § 1738. Authenticated state records and judicial proceedings “shall have the same full faith and credit in every court within the United States and its Territories and Possessions as they have by law or usage in the courts of such State, Territory or Possession from which they are taken.”7 A state judgment is therefore worth exactly as much in any other court as it is worth at home. The words “every court” matter, because the Full Faith and Credit Clause by its terms commands only the states, not the federal government. The statute is what obliges a federal court to honor a state judgment.8
Applied to preclusion, the statute reduces the choice-of-law problem to one question: would the courts of the rendering state bar the later claim or issue? The enforcing court puts that question to whatever feature of the doctrine is in dispute and answers from the rendering state's law, not its own.9 The rendering state's whole law counts. Full faith and credit “measures the effect of a judgment by all the laws of the rendering State, including authoritative rulings of that State's highest court on questions of issue preclusion and jurisdiction over third parties,” and the question is not what the first trial court intended but what effect its judgment has under its own state's controlling principles.10
A claim-preclusion example shows the forum's stricter rule losing. After a judgment in East Dakota, Altieri brings a second action in West Dakota, whose own preclusion rules would bar it. The West Dakota court must instead ask whether East Dakota's courts would have barred the action had Altieri brought it there. They would not, because East Dakota treats a claim for property damage as a different “primary right” than an action for personal injuries. The West Dakota court therefore allows the second action, even though its own rules would bar it.11
The same inquiry governs when the second case is in federal court. Altieri sues Quigley in a West Dakota state court and loses because the court finds him negligent. He then sues Romanoff, who took no part in the first case, in federal court, and Romanoff pleads nonmutual issue preclusion to keep Altieri from recovering. Section 1738 sends the federal court to West Dakota law. It applies nonmutual issue preclusion if the West Dakota courts would, and it lets Altieri relitigate if they would not.12 State rules differ on exactly this point, because most states reject the nonmutual offensive use that federal common law permits, and many (not all) allow nonmutual defensive use.13 The federal court's own preclusion doctrine does not decide the motion. Federal common law governs federal judgments, the subject of the next subsection.
An enforcing court cannot escape the rendering state's rule by pointing to its own policies. As the Supreme Court stated in 1998, “A court may be guided by the forum State's ‘public policy’ in determining the law applicable to a controversy. . . . But our decisions support no roving ‘public policy exception’ to the full faith and credit due judgments.”14 The command is firm, although there are occasions on which a court may decline to enforce a sister-state judgment.15
Schultz v. Boy Scouts of America, Inc. illustrates the limit. Plaintiffs who had sued in New Jersey, and had argued against the application of New Jersey's charitable immunity statute before that state's highest court, later faced collateral estoppel from that action in a New York court. The New York court agreed with them on one point: collateral estoppel would not apply if the court applied New York law or refused to enforce the New Jersey statute on public policy grounds. But it had “resolved those issues against them.” The plaintiffs had relied on the New Jersey action and pursued it vigorously, and they had obtained a stay of the New York action while it ran, so the court affirmed.16
The rendering state's rule decides the result in either direction. A practice memo on a Maryland disciplinary judgment applies the same method. Tayler, who was not a party to the disciplinary proceeding, wants to use its judgment against Chase, who was, to establish part of Tayler's claim, which makes the use nonmutual and offensive. The answer comes from Maryland law. Even if Maryland has abandoned mutuality for defensive use, it may not have gone the whole way to allow offensive use, and if it has, it may apply the discretionary standard the Supreme Court adopted as federal common law in Parklane Hosiery.17 Because § 1738 sends every enforcing court to Maryland law, the inquiry would be the same in another state's court or in a federal court.
Federal Judgments
A federal judgment falls outside both the Full Faith and Credit Clause and § 1738, because the Clause commands states and the statute speaks of the records and judicial proceedings of the courts of a State, Territory, or Possession.19 Neither text dictates what a federal judgment accomplishes in a later suit.20 That question belongs to federal common law, meaning rules the federal courts develop themselves where Congress has not legislated. The Supreme Court said so in Taylor v. Sturgell: federal common law determines the preclusive effect of a federal-court judgment, and in federal-question cases (there, a Freedom of Information Act suit) the federal courts participate in developing “uniform federal rule[s]” of res judicata, which the Supreme Court has ultimate authority to determine and declare.21 Federal common law on preclusion remains subject to due process limitations.22
The organizing question is the same as for state judgments: which preclusion law would the rendering court apply? For a federal court the answer has two steps. First, federal common law governs the effect of the federal judgment. Second, when the judgment was issued in a diversity case, one in which a federal court hears a state-law claim because the parties are citizens of different states, federal common law adopts the preclusion law of the state where the rendering federal court sat as the rule of decision.23 Semtek International Inc. v. Lockheed Martin Corp. is a leading example.24
The split follows the source of the claim. A federal-question judgment resolves a federal claim, so the federal courts shape one rule for it. A diversity judgment resolves a claim that state law created. If federal preclusion rules governed that judgment, the same state-law claim would meet different rules depending on whether the first suit was filed in a state or a federal courthouse, since federal common law permits nonmutual offensive issue preclusion and most states do not.25 This is the Erie concern at work, and borrowing the rendering state's law removes the difference.26
A state court enforcing a federal judgment shows the first step at work. Quigley's first action was in a federal court sitting in East Dakota, and he later brings a second action in a state court. Neither the Clause nor § 1738 settles what the federal judgment does there, because both concern state judgments. The state court applies federal common law preclusion principles to decide whether the claim or the issues from the federal action are precluded, unless the first suit was based on diversity.27 Those principles include the discretion over offensive nonmutual issue preclusion that the Supreme Court adopted as federal common law in Parklane Hosiery Co. v. Shore.28 Trial courts have broad discretion, and the general rule is that a judge should not allow offensive use where the plaintiff could easily have joined the earlier action or where applying it would be unfair to the defendant.29 Abandoning mutuality opens the door to case-by-case consideration without automatically producing preclusion. A court may deny it, for example, where the plaintiff deliberately stayed out of the first case to get the benefit without the risk of losing.30 The state court therefore asks whether federal law would let this plaintiff use the finding, and its own attitude toward mutuality does not enter the analysis. That mirrors the state-judgment rule, where state law supplied the content of the preclusion rule. Here the rendering court is federal, so federal law supplies it.
If Quigley's first suit had rested on diversity, the state court would look elsewhere. It would apply East Dakota's preclusion law to decide the effect of the federal judgment, because East Dakota is where the rendering federal court sat.31 The state whose law counts is fixed by the location of the rendering court, so the answer does not change if the second suit is filed in some other state, and the enforcing court's own mutuality rule matters only if it happens to match East Dakota's.
The same two steps govern when both suits are in federal court. Federal preclusion principles apply to the earlier judgment, except that the effect of a federal judgment based on diversity jurisdiction is decided by the preclusion rules of the state in which the rendering court sits.32
Set side by side, the three settings answer the same question, and only the identity of the rendering court changes the answer:
- A state-court judgment is measured by that state's preclusion law, in any later court, state or federal.33
- A federal-court judgment on a federal question is measured by federal common law, in any later court, state or federal.34
- A federal-court judgment in a diversity case is measured by the preclusion law of the state where that federal court sat, in any later court, state or federal.35
The two hypotheticals turn on the basis of federal jurisdiction in the first case. A federal-question judgment carries the federal rule into any later court, and a diversity judgment carries the law of the state where the federal court sat. A common error is to let the enforcing court's own preclusion rules control because that court is ruling on the motion. Those rules matter for a federal judgment only when they coincide with the law the rendering court would have applied, as when a diversity judgment is enforced in the courts of the state where the federal court sat. The opposite error is to treat every federal judgment as a federal-common-law judgment and forget that a diversity judgment borrows state law.