Interjurisdictional preclusion.

Author:Erichson, Howard M.
 
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Res judicata is hard enough already. Consider it at the interjurisdictional level, and we are asking for headaches. But consider it at that level we must, because litigation trends make interjurisdictional preclusion(1) more important than ever. Lawyers, judges, litigants, and other litigation participants increasingly must contemplate the possibility that a lawsuit will have claim-preclusive or issue-preclusive effect in a subsequent suit in another jurisdiction.

With great frequency, multiple lawsuits arise out of single or related transactions or events. Mass tort litigation and complex commercial litigation provide the most emphatic examples, but the phenomenon of multiple related lawsuits extends to every corner of litigation, including intellectual property,(2) matrimonial,(3) criminal,(4) antitrust,(5) personal injury,(6) securities,(7) commercial,(8) products liability,(9) environmental,(10) and civil rights.(11)

The participants in those multiple related lawsuits, moreover, increasingly find themselves litigating in far-flung forums. With continuing advances in transportation and communication, growing nationalization and internationalization of commerce, and an increasingly mobile society resulting in geographically dispersed family and business networks, it is hardly surprising that related lawsuits crop up in multiple jurisdictions. Furthermore, related lawsuits frequently are filed in both state and federal courts. Thus, controversies become multijurisdictional across two dimensions -- "horizontally" among different state courts and "vertically" between state and federal courts.

The problem of related lawsuits in multiple forums is exacerbated by our legal system's failure to provide adequate aggregation mechanisms for consolidating widespread litigation.(12) A recent spate of reversals of mass tort class certifications(13) drives home the point that litigants often must endure multiple closely related lawsuits, rather than resolving the entire controversy in one action. Proposed aggregation mechanisms that would allow the consolidation of dispersed litigation appear destined for failure, at least in the near term.(14)

This article examines the problem of interjurisdictional preclusion, and, in particular, the problem of choice of preclusion law. Choice of-preclusion law cannot be appreciated in the abstract, but rather must be considered in light of litigation realities. Thus, the article considers the following series of questions: First, how does preclusion law affect litigation behavior, and what policy implications result from these effects? Second, to what extent does preclusion law actually vary among jurisdictions? Third, what is the legal foundation for interjurisdictional preclusion, and what law ought to govern interjurisdictional preclusive effect? Fourth, how are courts in fact dealing with interjurisdictional preclusion, and what implications does that empirical information carry for choice of preclusion law?

Part I of the article considers the effect of preclusion law on the behavior of litigation participants and concludes that preclusion law can affect many of the most significant strategic decisions in litigation. Its impact on litigation behavior, however, is not felt primarily at the forum of the subsequent action ([F.sub.2], where the parties present their arguments on claim preclusion or issue preclusion. Rather, the impact is felt at the forum of the prior action ([F.sub.1]), where the parties and other participants make decisions based in part on their expectation of the preclusive effect a judgment will have. Thus, preclusion law matters to [F.sub.1]'s policy choices concerning judicial economy, settlement, lawsuit size, litigant zeal, and other litigation-related values.

To determine whether and how choice of preclusion law matters, Part II examines the extent to which preclusion law varies from one jurisdiction to another. Preclusion rules vary much more than most lawyers would suspect, and they vary in ways that implicate the strategic incentives discussed in Part I.

Given the importance of preclusion-law variations to strategic incentives at the initial forum, the choice of preclusion law must not turn on where the subsequent suit is filed. Rather, as Part III shows, interjurisdictional preclusion requires a "pure [F.sub.1] referent" and should nearly always be governed by [F.sub.1]'s own preclusion law. This applies not only to the state-state and state-federal configurations,(15) which are governed by the full faith and credit statute, but also to the federal-state configuration.

Part IV moves from the normative to the empirical. What, in fact, do courts do when presented with a potentially preclusive judgment from another United States jurisdiction? Of course, they acknowledge the judgment's binding effect. But whose law do they use to determine the nature and extent of the judgment's effect? The article presents the results of my study of several hundred interjurisdictional preclusion cases, focusing on the federal-state configuration. Most often state courts apply their own preclusion law, rather than the law of the rendering jurisdiction. Generally, this appears to be done reflexively, as decisions rarely offer any analysis of choice of preclusion law.

In light of this finding, recommending a complex rule involving a nuanced balancing of the interests of multiple jurisdictions appears futile. Moreover, given the significance of preclusion law's effect on litigation behavior, litigation participants need to know at the outset what preclusion law will ultimately govern, regardless of where subsequent cases are brought. When it comes to choice of preclusion law, what the courts and litigation participants need is a clear rule determinable at the time of the original action. The preclusive effect of a judgment, with rare exceptions, should be governed by the preclusion law of the rendering jurisdiction.

  1. PRECLUSION LAW'S EFFECT ON LITIGATION BEHAVIOR

    Litigation is not a purely rational activity, but that should not stop us from considering the law's, effect on rational actors. It is true that litigators, litigants, and interested others sometimes act based on fear, pride, anger, and a host of other emotions. Moreover, even if all participants always attempted to make rational decisions, they often would fail to do so simply for lack of tactical insight.(16) Nevertheless, enough litigation participants behave rationally and intelligently to make it worthwhile to examine how such participants would behave(17) -- in other words, to examine the strategic significance of preclusion law.

    First, where does preclusion law affect litigation behavior? At [F.sub.2], the impact of preclusion law on behavior is obvious but limited. Preclusion law affects behavior at [F.sub.2] inasmuch as the litigants there may raise and argue the question of preclusion, and preclusion may determine the outcome of the case. A party who believes that she can benefit from claim or issue preclusion will make a motion to that effect, and her opponent will attempt to fend off adverse preclusion. Further, parties at [F.sub.2] may try to tailor pleadings to maximize or minimize the chance of claim preclusion or issue preclusion.

    But more significant than the effect of preclusion law on litigation behavior at [F.sub.2] is its effect on litigation behavior at [F.sub.1]. In any lawsuit in which there is a risk of further related litigation, the careful litigator must take into account the preclusive effect a judgment might have in such future litigation and must calculate accordingly. Others have noted preclusion law's strategic significance,(18) but no one has given it the sustained attention required if we are to understand interjurisdictional preclusion in light of the realities of litigation practice.

    1. Zeal and Appeal

      Preclusion law affects the vigor with which a party litigates. Consider the position of any litigant who anticipates future related litigation with persons who are not parties to the current lawsuit. The rational litigant will expend resources on the lawsuit in proportion to the stakes of the suit. The more that is at stake, the more tenaciously the parties will fight. Traditionally, mutuality was required for issue preclusion, and it is still required in a number of jurisdictions.(19) With a mutuality requirement, issue preclusion applies only between parties, or those in privity with parties, to the initial lawsuit. Under such a regime, a rational litigant will consider only the stakes between the current parties, either in the immediate lawsuit or in foreseeable further lawsuits between the same parties. By contrast, when nonmutual issue preclusion is allowed, a rational litigant will consider the stakes not only between the current parties, but also the stakes in foreseeable lawsuits with others. Thus, wherever a litigant can foresee related litigation with nonparties, nonmutual issue preclusion produces incentives to invest greater resources into winning in order to prevent adverse determinations that may carry a damaging issue-preclusive effect in subsequent suits.(20) As one litigator puts it, "The lesson is clear -- never lose the prior case."(21)

      The burden of this incentive can be particularly dire for mass tort defendants, but only if the applicable law allows offensive nonmutual issue preclusion.(22) If offensive nonmutual issue preclusion is allowed, a mass tort defendant -- or any defendant facing a large number of lawsuits growing out of a single incident or related series of incidents -- correctly perceives the first trial as a "must win" situation. If the defendant loses the first trial and the essential liability issues are decided in favor of the plaintiff, then the defendant faces the significant risk that each future plaintiff will avail himself of issue preclusion to establish liability. If, on the other hand, the defendant wins the first trial by...

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