Claim & Issue Preclusion

Johnson v. Spencer, 950 F.3d 680 (10th Cir. 2020)

HOLMES, Circuit Judge

In 2013, a Wyoming court declared Andrew Johnson actually innocent of crimes for which he was then incarcerated. In 2017, after his release, Mr. Johnson brought suit under 42 U.S.C. § 1983 against the City of Cheyenne, Wyoming (“Cheyenne”), the Estate of Detective George Stanford (“the Estate”), and Officer Alan Spencer alleging that they were responsible for violations of his constitutional rights that contributed to his conviction (“2017 Action”). While incarcerated, however, Mr. Johnson had unsuccessfully brought similar suits against Cheyenne and Detective Stanford in 1991 (“1991 Action”) and against Officer Spencer in 1992 (“1992 Action”). The central question on appeal is what effect the judgments against Mr. Johnson in his 1991 and 1992 Actions have on his 2017 Action.

Cheyenne, the Estate, and Officer Spencer each moved the district court under Federal Rule of Civil Procedure 12(b)(6) to dismiss the 2017 Action because its claims are precluded by the judgments in the 1991 and 1992 Actions. The district court granted those motions and denied Mr. Johnson’s later motions for reconsideration of and relief from that dismissal. We affirm in part and reverse in part the district court’s dismissal of the 2017 Action. More specifically, we affirm the dismissal of the claims against Cheyenne and the Estate because the judgment in the 1991 Action—in which they were the defendants—is entitled to claim-preclusive effect. We reverse, however, the dismissal of the claims against Officer Spencer because the judgment in the 1992 Action—in which he was the defendant—was not on the merits and, thus, is not entitled to claim-preclusive effect.

I. BACKGROUND

A. Factual Background

Late one night in June 1989, Mr. Johnson ran into a female acquaintance at a bar in Cheyenne and returned with her to the apartment that she shared with her boyfriend, who was away at the time. They drank wine and smoked marijuana in her living room, and Mr. Johnson used his driver’s license and picture I.D., which were enclosed in a clear plastic sleeve, to separate marijuana leaves from their stems and seeds for the joints that they smoked. Mr. Johnson and his female acquaintance then left her apartment in her car and visited multiple bars in downtown Cheyenne. Mr. Johnson, however, forgot his license and picture I.D. on the coffee table in his acquaintance’s living room.

The acquaintance eventually became sick and vomited in her car while Mr. Johnson was driving them to an after-hours club. When Mr. Johnson went inside the club to get some paper towels to clean up her vomit, the acquaintance climbed into the driver’s seat and drove herself home. Mr. Johnson returned to find that his acquaintance and her car were gone. He then walked to his home, thirty-five minutes away, and went to sleep.

Later that night, from around 3:00 a.m. to 3:10 a.m., the acquaintance’s downstairs neighbor heard aggressively loud, periodic knocking on the door to the stairs leading to the acquaintance’s upstairs apartment. Eventually, she heard the door’s glass window pane shatter, followed by footsteps crossing the broken glass and walking upstairs to the acquaintance’s apartment. The neighbor heard the intruder walking around the acquaintance’s apartment and then a woman screaming what sounded like “No, no!” The neighbor immediately called the police. While the neighbor was speaking to the police dispatcher, she heard the intruder walk back down the stairs, over the broken glass, and out of the building, less than ten minutes after breaking into the upstairs apartment.

When Officer Spencer and Officer Phillip Raybuck of the Cheyenne Police Department arrived about a minute later, they found the acquaintance whimpering hysterically in her bathroom with the door ajar. The rest of the apartment was dark. Officer Spencer later testified at trial that, when they asked the acquaintance to come out of the bathroom, she screamed at them, and it took him a moment to realize that she was repeatedly asking, “Is he still here?” The officers searched her apartment and found no one else. They told her that they were the only ones there and she could open the bathroom door. Officer Spencer testified that the acquaintance opened the door some more—revealing that her hair was mussed, her eyes were wet and red, and her robe was half undone—and she repeatedly said, “He hurt me.”

According to Mr. Johnson, Officer Spencer must have taken his driver’s license and picture I.D. off of the coffee table in the living room and, upon being told by the acquaintance that a man had “hurt” her, showed them to her, “prompting” her “to affirmatively assert Mr. Johnson was that man.” Officer Spencer testified that it took him a while to understand what Mr. Johnson allegedly did to the acquaintance because she was still choked up and crying, but that she ultimately led him to believe that Mr. Johnson had sexually assaulted her.

Officer Spencer took the acquaintance to a local hospital where she was medically examined and had a sexual-assault kit performed, resulting in the discovery of seminal fluid. Officer Raybuck then went through the acquaintance’s apartment taking photographs of the crime scene. Some of these photographs were provided to Mr. Johnson’s trial counsel, but others were not.

Later that morning, Mr. Johnson was awakened by a police officer knocking on his front door. The officer asked him if he had any knowledge about a burglary and sexual assault that had happened during the night. Mr. Johnson denied having any knowledge of the crimes. The officer then arrested him and took him to jail.

Detective Stanford investigated the acquaintance’s sexual-assault allegation. He took biological samples from Mr. Johnson pursuant to a warrant and interviewed the acquaintance at least three times. At trial, he testified that the acquaintance called him two days after the sexual assault and told him that she had found Mr. Johnson’s eyeglasses in her bedroom—the same eyeglasses, she said, that he had worn at the bars they went to after leaving her apartment on the night she was assaulted. Mr. Johnson claims that his glasses must have been “planted” in the bedroom “by or on behalf of” the acquaintance.

At trial, the acquaintance testified that Mr. Johnson broke into her apartment and raped her. She also testified that Mr. Johnson had his I.D. card when they went barhopping after leaving her apartment because he produced his card to enter one of the bars. The prosecution, as mentioned, introduced testimony from Officer Spencer and Detective Stanford about the driver’s license, picture I.D., and eyeglasses that were found in the apartment. An expert witness for the prosecution testified that, based on forensic testing, Mr. Johnson was “among the five percent of the population who could have left the seminal fluid” recovered by the acquaintance’s sexual-assault kit. The jury convicted Mr. Johnson of aggravated burglary and first degree sexual assault. The Supreme Court of Wyoming affirmed his conviction.

Mr. Johnson remained imprisoned for twenty-four years. Then, in August 2013, he was declared actually innocent by a Wyoming court after improved DNA testing revealed that the seminal fluid samples in the acquaintance’s sexual-assault kit did not match his DNA but, rather, the DNA of the acquaintance’s then-boyfriend. According to Mr. Johnson, the Cheyenne Police Department should not have believed the acquaintance and her boyfriend when they told the police that the boyfriend was out of town for work on the night she was sexually assaulted.

B. Procedural Background

1. The 1991 Action

While incarcerated, Mr. Johnson filed at least two federal civil-rights actions in Wyoming federal district court against those he claimed were responsible for his conviction. The first of these actions was a suit he filed in forma pauperis in 1991 against the City of Cheyenne and Detective Stanford, among other parties. Within seven days of the filing of his original complaint, Mr. Johnson also filed a demand for a jury trial. He then amended his complaint, alleging, inter alia, that Cheyenne had failed to train its officers in proper methods of investigation and that Detective Stanford had violated his constitutional rights during the investigation by, for example, the manner in which the detective interrogated him.

About a month after the defendants answered his amended complaint, Mr. Johnson requested a hearing on the complaint and a jury trial. The district court granted him an evidentiary hearing, but denied him a jury trial. At the hearing, Mr. Johnson objected to the court’s denial of a jury trial, but his objection was overruled. Near the end of the hearing, the defendants argued that the case was ripe for summary judgment, and the district court responded that they could move for it. The district court also ordered the parties to submit proposed findings of fact and conclusions of law. But before the district court entered any findings or conclusions, the case was transferred to another district judge, who, in turn, referred the case to a magistrate judge for a new evidentiary hearing. Mr. Johnson, however, did not object to the new hearing. And it appears that he did not renew his request for a jury trial before the new district judge.

At the beginning of the new evidentiary hearing, the magistrate judge denied the defendants’ motions for summary judgment, which they had filed after the first evidentiary hearing, because there were genuine disputes of material fact. The magistrate judge indicated that he would be making the relevant findings of fact based on the evidence proffered at the hearing, and Mr. Johnson, again, did not object. The magistrate judge then conducted a bench trial and issued Findings of Fact and Recommendations, advising in the end “that Mr. Johnson’s complaint be denied with prejudice.” Mr. Johnson filed objections to the magistrate judge’s report. The district court overruled his objections and adopted the magistrate judge’s recommendations, dismissing Mr. Johnson’s claims with prejudice.

Mr. Johnson appealed, and a panel of our court entered an order and judgment affirming the district court’s judgment.

2. The 1992 Action

While his 1991 Action was pending, Mr. Johnson filed another federal civil-rights action—this time a 42 U.S.C. § 1983 suit against Officer Spencer. Mr. Johnson alleged that Officer Spencer had violated his due-process rights “by knowingly and willfully giving false testimony at his original jury trial” about the eyeglasses that his acquaintance said that he had worn and she had found in her bedroom. He also moved the district court for leave to proceed in forma pauperis.

Before Officer Spencer filed any responsive document, the district court entered an order sua sponte dismissing the complaint with prejudice as frivolous. The court noted that in the 1991 Action it had “concluded there were no facts justifying the plaintiff’s claims that his constitutional rights were violated” with respect to the trial evidence about his eyeglasses, and that “the present complaint was simply another attempt by him to revisit the same claim that had previously been dismissed.” The court reviewed the exhibits submitted with the complaint and determined that they did not “establish even the slightest indication that Officer Spencer had made false, or inconsistent, statements at the trial.” The court held that “Plaintiff had made no new argument in his complaint and that the complaint was frivolous and completely devoid of merit.” The court then went on to hold that, “even assuming Mr. Johnson’s constitutional rights were violated by” Officer Spencer, any error was “harmless” in light of the strong evidence of guilt presented at Mr. Johnson’s trial. The court described “the evidence and Officer Spencer’s challenged testimony regarding the eyeglasses” as, “at best, extraneous and cumulative.” It then “dismissed the complaint with prejudice as frivolous.”

On appeal, we affirmed, noting that the district court had “dismissed the action as factually frivolous under 28 U.S.C. § 1915(d).” In doing so, we stated that “Mr. Johnson’s lawsuit is based upon an indisputably meritless legal theory because a testifying police officer is entitled to absolute immunity.” Thus, “dismissal was appropriate.”

3. The 2017 Action

After he was exonerated, Mr. Johnson filed a third federal civil-rights action, i.e., the 2017 Action under § 1983. He alleged that Cheyenne, Detective Stanford, Officer Spencer, and unnamed members of Cheyenne’s police department violated his constitutional rights. In particular, he alleged that the defendants suppressed photographs of the crime scene that would have exonerated him, failed to preserve those photographs, fabricated evidence by prompting the acquaintance to identify him as the intruder who broke into her apartment, and, as to Cheyenne, failed to have adequate policies and training for its officers.

In May 2017, Cheyenne and Officer Spencer separately moved to dismiss the complaint, arguing, inter alia, that the claims against them were precluded by the judgments in the 1991 and 1992 Actions, respectively. The Estate later filed its own motion to dismiss, raising, inter alia, claim preclusion with respect to the 1991 Action. The defendants each attached records from the prior proceedings to their motions.

In July 2017, the district court granted all three motions to dismiss. “Although Defendants raised several bases for dismissal of Plaintiff’s claims against them,” the district court concluded that “res judicata, or claim preclusion, barred Plaintiff’s action and was therefore dispositive of Defendants’ motions to dismiss.” In particular, the district court concluded that both the 1991 and 1992 Actions had resulted in final judgments on the merits against Mr. Johnson, had been between the same parties as the 2017 Action, and had concerned the same transaction as the 2017 Action. The district court rejected Mr. Johnson’s argument that Heck v. Humphrey, 512 U.S. 477 (1994)—which held that prisoners may not bring a § 1983 action that calls into question the lawfulness of their conviction until the conviction has been invalidated—implied that the judgments against him in his 1991 and 1992 pre-Heck Actions were not entitled to claim-preclusive effect because his underlying conviction had not yet been invalidated. Although Mr. Johnson had yet to respond to the Estate’s motion to dismiss, the court granted it, too, “because the res judicata analysis did not differ and was equally dispositive as to Detective Stanford.”

II. DISCUSSION

The central question in this appeal is whether the judgments in the prior litigation concerning Mr. Johnson’s conviction—i.e., the judgments in the 1991 and 1992 Actions—prevent him from bringing a new lawsuit—i.e., the 2017 Action—against the same defendants after his exoneration. The answer turns on the doctrine of claim preclusion. Claim preclusion “prevents a party from litigating a legal claim that was or could have been the subject of a previously issued final judgment.” For claim preclusion to apply, “three elements must exist: (1) a final judgment on the merits in an earlier action; (2) identity of parties or privies in the two suits; and (3) identity of the cause of action in both suits.” “Even if these three elements are satisfied, there is an exception to the application of claim preclusion where the party resisting it did not have a ‘full and fair opportunity to litigate’ the claim in the prior action.”

We address in Part B whether the judgments in the 1991 and 1992 Actions have claim-preclusive effect on the 2017 Action. We conclude that the judgment in the 1991 Action—in which Detective Stanford and Cheyenne were defendants—has claim-preclusive effect. But we conclude that the judgment in the 1992 Action—in which Officer Spencer was the defendant—does not have claim-preclusive effect because that case was not decided “on the merits.” We, thus, do the following: (1) reverse the district court’s order granting Officer Spencer’s Rule 12(b)(6) motion to dismiss the 2017 Action and remand for further proceedings, and (2) affirm the district court’s order granting the Estate’s and Cheyenne’s Rule 12(b)(6) motions to dismiss the 2017 Action.

B. The Defendants’ Rule 12(b)(6) Motions in the 2017 Action

In the following discussion, we address (1) our standard of review, (2) the general framework governing claim-preclusion, and (3) how that law applies to the 1991 and 1992 Actions. We conclude that the district court correctly held that the 1991 Action has claim-preclusive effect on the 2017 Action, but erred in holding that the 1992 Action has such effect. We, thus, affirm in part and reverse in part.

2. Background Principles of Claim Preclusion

Before proceeding further into our de novo review, we pause to frame the applicable claim-preclusion doctrine. “The principle underlying the rule of claim preclusion is that a party who once has had a chance to litigate a claim before an appropriate tribunal usually ought not have another chance to do so.” “The preclusive effect of a federal-court judgment is determined by federal common law.” We require defendants to prove three elements to prevail on this defense: “(1) a final judgment on the merits in an earlier action; (2) identity of parties or privies in the two suits; and (3) identity of the cause of action in both suits.” “In addition, even if these three elements are satisfied, there is an exception to the application of claim preclusion where the party resisting it did not have a ‘full and fair opportunity to litigate’ the claim in the prior action.”

Although we have at times “characterized the ‘full and fair opportunity to litigate’ as a fourth requirement of res judicata,” we have since clarified that “the absence of a full and fair opportunity to litigate is more appropriately treated as an exception to the application of claim preclusion when the three referenced requirements are met.”

In this case, Mr. Johnson concedes that the district court correctly ruled that the second and third elements of claim preclusion are satisfied here. See Thus, the judgments in the 1991 and 1992 Actions will have claim-preclusive effect against Mr. Johnson so long as they were “on the merits” and he had a “full and fair opportunity to litigate.” Although Mr. Johnson argues that the 1992 Action did not provide him with a “full and fair opportunity to litigate,” we do not address the merits of that argument because, as explicated below, we agree with his contention that the district court erred in holding that the judgment in that action was “on the merits.” The 1992 Action, accordingly, should not have been given claim-preclusive effect. As for the 1991 Action, Mr. Johnson does not argue that the district court erred in concluding that it had entered a judgment “on the merits.” Consequently, we take up below solely the question of whether Mr. Johnson had a “full and fair opportunity to litigate” his claims in the 1991 Action. We conclude that he did have such an opportunity. We, thus, affirm that aspect of the district court’s claim-preclusion determination.

3. Application

In the following discussion, as indicated, we focus on whether the 1991 Action provided Mr. Johnson with a “full and fair opportunity to litigate” and whether the 1992 Action was adjudicated “on the merits.” As to the 1991 Action, we conclude that Mr. Johnson had a “full and fair opportunity to litigate” his claims because the decision to conduct a bench trial that ostensibly deprived him of that opportunity presented a procedural issue that he had a full and fair opportunity to litigate before the district court, but then waived on appeal, even though he could have fully and fairly litigated it there as well. As to the 1992 Action, in contrast, we conclude that Mr. Johnson correctly contends that the action was not adjudicated “on the merits” because the district court expressly dismissed it as frivolous under the then-applicable 28 U.S.C. § 1915(d). Accordingly, we affirm the district court’s dismissal of the claims precluded by the 1991 Action—i.e., those against the Estate and Cheyenne—but reverse its dismissal of the claims ostensibly precluded by the 1992 Action—i.e., those against Officer Spencer.

a. The 1991 Action is entitled to claim-preclusive effect.

The parties dispute whether the 1991 Action is entitled to claim-preclusive effect and, more specifically, whether it constituted a “full and fair opportunity to litigate.” Mr. Johnson also argues that, even if the 1991 Action might give rise to claim preclusion, Cheyenne and the Estate have failed to muster legally sufficient proof to establish this. We reject both arguments and, thus, uphold the district court’s dismissal of the claims against Cheyenne and the Estate, i.e., the parties to the 1991 Action.

i. The “Full and Fair Opportunity to Litigate” Requirement

The “full and fair opportunity to litigate” inquiry is a “narrow exception” that “applies only where the requirements of due process were not afforded—where a party shows ‘a deficiency that would undermine the fundamental fairness of the original proceedings.’” “The fairness of the prior proceeding ‘is determined by examining any procedural limitations, the party’s incentive to fully litigate the claim, and whether effective litigation was limited by the nature or relationship of the parties.’” Here, Mr. Johnson argues, that the district court’s decision in the 1991 Action to convene a bench trial instead of a jury trial was a procedural limitation that denied him a “full and fair opportunity to litigate” his claims. We disagree.

As we mentioned, the procedural limitation at issue here—i.e., the denial of a jury trial—is a matter that Mr. Johnson fully litigated before the district court in the 1991 Action and could have fully challenged on appeal, but failed to do. More specifically, after the district court denied Mr. Johnson’s motion for a jury trial and started to conduct an evidentiary hearing on his complaint instead, Mr. Johnson objected to that procedure in court. The district court overruled the objection. After his case was assigned to a new district judge, that judge entered judgment for the defendants following a bench trial held about 10 months after the evidentiary hearing. Mr. Johnson appealed from the district court’s judgment. Although he could have challenged the process that the district court afforded him, he failed to do so. The judgment in the 1991 Action then became final; any procedural challenges Mr. Johnson could have raised against it were waived by his failure to present them on appeal.

As the governing authorities make clear, it is enough for full-and-fair-opportunity-to-litigate purposes that the litigant had a full and fair opportunity to contest the procedural obstacle that ostensibly barred meaningful consideration of his claims. Mr. Johnson had that opportunity here. In this regard, our decision in Hanley v. Four Corners Vacation Properties, Inc., is instructive. In Hanley, the plaintiffs-appellants argued that a prior state judgment “was void and subject to collateral attack because of the lack of service of process.” The defendants-appellees defended the prior judgment on the ground that “the due process issue pertaining to the alleged defect in service of process was fully litigated previously in state court, culminating in a judgment” against the plaintiffs-appellants. The district court “sustained the defense,” holding that the prior judgment should be accorded claim-preclusive effect. We affirmed, stating that “it is well settled that where the issue of due process has been litigated and a final judgment entered, the determination of that issue, right or wrong, is res judicata.” In reaching that holding, we reasoned that the plaintiffs-appellants’ due-process concerns were litigated in state court, where “an adequate remedy was available through the state appellate process.” And we concluded that the plaintiffs-appellants “have had their day in court on these issues and a final judgment entered thereon. They cannot relitigate them in federal court.”

As in Hanley, so too here. Mr. Johnson had a full and fair opportunity to litigate the alleged procedural limitation—i.e., the denial of a jury trial—before the district court in the 1991 Action, and, after the court entered judgment, he had a full and fair opportunity to challenge the court’s procedures on appeal before that judgment became final. The fact that he did not present a procedural challenge on appeal does nothing to diminish the opportunity that he had to do so; he simply lost his chance. Like the plaintiffs-appellants in Hanley, Mr. Johnson “had his day in court on this issue and a final judgment entered thereon.” The district court, therefore, properly determined that he could not “relitigate” the issue in the 2017 Action.

In sum, it is clear to us that Mr. Johnson cannot escape from the claim-preclusive effect of the 1991 Action based on a procedural argument that was previously litigated and adjudicated in that action and that he had an opportunity to appeal before that judgment became final. Consequently, we reject Mr. Johnson’s contention that the 1991 Action did not provide him with a “full and fair opportunity to litigate.”

ii. Cheyenne and the Estate carried their burden on the claim-preclusion defense.

Mr. Johnson also contends that, even if the 1991 Action could give rise to claim preclusion, Cheyenne and the Estate have failed to muster legally sufficient proof to establish this. We reject this argument.

Mr. Johnson argues that “even if the 1991 Action could give rise to claim preclusion, appellees failed to prove claim preclusion in their Rule 12(b)(6) motions.” As a threshold matter, we note that much of this argument appears based on the fact that the district court relied on facts not included in the complaint, but we have already explained that the district court’s judicial notice of its own records was permissible. Further, because Mr. Johnson is only challenging the district court’s claim-preclusion ruling with respect to the 1991 Action on the ground that he was not given a “full and fair opportunity to litigate” his claims there, we most appropriately view his current lack-of-proof argument through that limited lens.

That said, we recognize that Mr. Johnson’s argument appears to grow out of the lack of clarity in our earlier cases about whether the full-and-fair-opportunity-to-litigate factor should be classified as an “element” of, or an “exception” to, claim preclusion; we have clarified that it is the latter. Mr. Johnson, however, effectively rejects this clarification and suggests that the district court did not properly allocate the burden of proof—specifically, the burden of persuasion—on Cheyenne and the Estate with respect to the fair-and-full-opportunity-to-litigate factor.

It is beyond cavil that claim preclusion is an affirmative defense, as to which the defendant bears the burden of proof. But at least arguably in our precedential decisions, we have effectively allocated to “the party seeking to avoid preclusion” the burden of proof as to the full-and-fair-opportunity-to-litigate exception. Be that as it may, we need not definitively opine here on this burden-of-proof question because the district court, in fact, placed the burden of proof for the full-and-fair-opportunity factor—including the burden of persuasion—on the defendants. Insofar as Mr. Johnson suggests that the court’s observation that he “failed to rebut” the defendants’ proof demonstrates that the court actually placed the burden of proof on him, we disagree. Instead of treating the full-and-fair-opportunity factor as an exception to preclusion, the district court viewed it as one of “‘four’ res judicata elements” that the defendants had “the burden of showing.” The court, therefore, made its observation that Mr. Johnson did not rebut the defendants’ proof in the context of its express statement that it had held the defendants to “the burden of showing that Mr. Johnson had a full and fair opportunity to litigate the claims in the prior suits.” Accordingly, Mr. Johnson has no basis to object to the district court’s allocation of the burden of proof as to the full-and-fair-opportunity-to-litigate factor because the court allocated the burden as he desired.

In sum, we reject Mr. Johnson’s argument that Cheyenne and the Estate have failed to muster legally sufficient proof to establish claim preclusion as to the 1991 Action.

iii. Heck v. Humphrey Redux

Mr. Johnson also returns to an iteration of his Heck argument. He argues that, under Heck, he could not have brought the claims in his 2017 Action until he was exonerated in 2013 and so the district court erred in deeming those claims precluded by his earlier actions.

Mr. Johnson’s argument starts with Heck’s teaching that, to determine whether a prisoner’s conviction has prevented his § 1983 claim pertaining to that conviction from accruing, courts “must consider whether a judgment in favor of the plaintiff would necessarily imply the invalidity of his conviction or sentence.” “If it would, the complaint must be dismissed unless the plaintiff can demonstrate that the conviction or sentence has already been invalidated.” Mr. Johnson adds to those principles from Heck our statement in Lenox MacLaren Surgical that “claim preclusion does not bar subsequent litigation of new claims based on facts the plaintiff did not and could not know when it filed its complaint.” Combining Heck and Lenox MacLaren Surgical, Mr. Johnson reasons that “since invalidation of his conviction was a non-existent fact at the time of his prior actions, he could not have brought his present claims in those prior actions.” He, in other words, argues that his claims did not begin accruing until he was exonerated.

But this argument runs into similar problems as those discussed above. Regardless of whether the district court in the 1991 Action should have held—even before Heck was decided—that Mr. Johnson’s claims were not cognizable under § 1983, the 1991 Action nonetheless adjudicated Mr. Johnson’s claims against Detective Stanford and Cheyenne. Following his appeal, the judgment in that case became final, and that final judgment will have claim-preclusive effect on the 2017 Action if the elements of preclusion are met. Because Mr. Johnson concedes that the district court correctly ruled that the second and third elements of claim preclusion are satisfied here, the 1991 Action will have claim-preclusive effect so long as it was “on the merits” and provided a “full and fair opportunity to litigate.” But Mr. Johnson does not argue that the district court erred in concluding that the 1991 Action was “on the merits,” and we have already rejected his argument that the action did not provide a “full and fair opportunity to litigate.” And so the judgment in the 1991 Action has precluded claims like those in the 2017 Action from the time it became final.

The Supreme Court’s later opinion in Heck did nothing to disturb the parties’ reliance on that final judgment: “once suit is barred by res judicata or by statutes of limitation or repose, a new rule cannot reopen the door already closed.”

We, thus, reject Mr. Johnson’s argument that the claims in the 2017 Action were not precluded by the 1991 Action because they were not cognizable under § 1983 until after he was exonerated.

In sum, we hold that the claims in the 2017 Action against Cheyenne and the Estate are precluded by the 1991 Action. We, thus, affirm the dismissal of those claims.

b. The 1992 Action is not entitled to claim-preclusive effect.

With respect to the 1992 Action, Mr. Johnson primarily disputes the first element of claim preclusion, i.e., whether there was “a final judgment on the merits.” We recount the relevant procedural history before agreeing with Mr. Johnson that the 1992 Action was not adjudicated “on the merits” and, therefore, did not have claim-preclusive effect on the 2017 Action. We, thus, reverse the district court’s dismissal of the claims against Officer Spencer—the only defendant in the 1992 Action—and remand for further proceedings on those claims. Because we conclude that the 1992 Action was not adjudicated “on the merits,” we need not entertain Mr. Johnson’s separate argument that the 1992 Action did not afford him a “full and fair opportunity to litigate.”

i. Relevant Procedural History

Mr. Johnson’s 1992 Action was a § 1983 suit alleging that Officer Spencer violated his due-process rights by providing false testimony about his eyeglasses at his criminal trial. The district court dismissed the complaint sua sponte with prejudice as frivolous, (1) noting that in the 1991 Action it had “concluded there were no facts justifying the plaintiff’s claims that his constitutional rights were violated” and (2) holding that “the present complaint was simply another attempt by plaintiff to revisit the same claim that has previously been dismissed.” The court reviewed the exhibits that Mr. Johnson had submitted with his complaint and concluded that they did not “establish even the slightest indication that Officer Spencer made false, or inconsistent statements at the trial.” The court, in conclusion, observed that Mr. Johnson had “made no new argument in his complaint” and, thus, held that his complaint was “frivolous and completely devoid of merit.”

Further, the district court stated that “even assuming Mr. Johnson’s constitutional rights were violated by Officer Spencer, it was harmless error.” The court held in particular that “no reasonable possibility existed to believe the evidence of Mr. Johnson’s eyeglasses might have contributed to his conviction” because there was other evidence—viz., the acquaintance’s identification of him, the presence of his driver’s license and picture I.D. in her apartment, and the forensic evidence tying him to the seminal fluid preserved in the acquaintance’s sexual-assault kit—that had established Mr. Johnson’s guilt. The court, thus, concluded that Officer Spencer’s trial testimony about Mr. Johnson’s eyeglasses “was, at best, extraneous and cumulative.” The court then “dismissed the complaint with prejudice as frivolous,” noting that Mr. Johnson had filed several related lawsuits, “all of which were frivolous and vexatious in nature.” The court subsequently underscored the basis for its action, after noting that it had “come to the attention of the court” that Mr. Johnson’s in forma pauperis motion was still pending. The court noted that it had recently determined that Mr. Johnson “had failed to present a rational argument on the facts or law in support of his clam and that the complaint was frivolous and devoid of merit.” “Therefore,” the court denied Mr. Johnson’s in forma pauperis motion.

On appeal from that judgment, we noted that the district court “dismissed the action as factually frivolous” and affirmed on the ground that “Mr. Johnson’s lawsuit is based upon an indisputably meritless legal theory because a testifying police officer is entitled to absolute immunity.”

ii. The “On the Merits” Requirement

As mentioned, a successful claim-preclusion defense requires “a final judgment on the merits in the earlier action.” Mr. Johnson argues that the 1992 Action was not an adjudication “on the merits” because the suit was dismissed as frivolous. We agree.

The Supreme Court settled this question in Denton v. Hernandez. There, the Court addressed “the appropriate inquiry for determining when an in forma pauperis litigant’s factual allegations justify a § 1915(d) dismissal for frivolousness.” In doing so, the Court stated that “because a § 1915(d) dismissal is not a dismissal on the merits, but rather an exercise of the court’s discretion under the in forma pauperis statute, the dismissal does not prejudice the filing of a paid complaint making the same allegations.”

In the 1992 Action, the district court expressly relied on the then-existing § 1915(d) in dismissing Mr. Johnson’s claim as “frivolous and completely devoid of merit.” And so, following Denton, we conclude that the district court’s dismissal of the 1992 Action was not “on the merits.”

Officer Spencer argues against this straightforward conclusion. He first contends that while it is “generally” true that a § 1915(d) dismissal is not “on the merits” when it is for factual frivolousness, the dismissal here should be deemed “on the merits” for claim-preclusion purposes because the district court additionally determined that Mr. Johnson’s claims were not legally meritorious because any error was harmless. We reject this argument. The old § 1915(d) allowed district courts to dismiss a complaint as frivolous when it “lacked an arguable basis either in law or in fact.” Although the Court in Denton emphasized that § 1915(d) provided courts with “the unusual power to pierce the veil of the complaint’s factual allegations,” thereby deviating from the Rule 12(b)(6) standard of largely “accepting without question the truth of the plaintiff’s allegations,” the Court ultimately drew no distinction between § 1915(d) dismissals for legal frivolity and those for factual frivolity when it stated that “a § 1915(d) dismissal is not a dismissal on the merits.” While Denton itself specifically addressed a factually frivolous complaint, its rule that § 1915(d) dismissals are not on the merits contemplated § 1915(d) dismissals generally, i.e., dismissals based on both legal and factual frivolity.

Denton created a simple rule applying to all dismissals for frivolousness under the pre-1996 § 1915(d), regardless of whether the frivolousness was legal or factual, and we apply that rule here. The district court explicitly based its dismissal on § 1915(d). Although the court appended to the end of its order a one-paragraph discussion of the harmlessness of any purported error, that discussion did not transform the dismissal into a merits adjudication. Because the 1992 Action was not adjudicated on the merits, it has no preclusive effect on Mr. Johnson’s paid complaint in the 2017 Action.

Officer Spencer also cites Bell v. Hood for the proposition that if a court “exercises its jurisdiction to determine that the allegations in the complaint do not state a ground for relief, then dismissal of the case would be on the merits, not for want of jurisdiction.” But that general proposition in Bell does not address whether frivolousness determinations are on the merits, as the very next sentence makes clear. Therefore, we conclude that this proposition in Bell does nothing to limit the breadth of Denton’s relevant pronouncement.

Relatedly, Officer Spencer relies on the Ninth Circuit’s statement that “a dismissal for failure to state a claim under Rule 12(b)(6) is a ‘judgment on the merits’ to which res judicata applies.” But that uncontroversial statement simply has no application here. The district court did not sua sponte dismiss the claim at issue here pursuant to Rule 12(b)(6); it expressly invoked § 1915(d). Stewart’s discussion of Rule 12(b)(6) therefore has nothing to contribute to Denton’s interpretation of § 1915(d).

Finally, the parties dispute whether an order with two holdings, one “on the merits” and one not, can have claim-preclusive effect. But we need not wade into this dispute. Notwithstanding the district court’s discussion of harmlessness, its judgment in the 1992 Action was expressly and solely bottomed on a dismissal under § 1915(d). The court did not purport to rule on the merits, but instead dismissed under § 1915(d) on frivolousness grounds. And Denton settles the question that such dismissals are not on the merits. This is not a case where the district court made two holdings—one on the merits and one not—and so the claim-preclusive effects of such a circumstance are not before us.

In sum, because it was not an adjudication on the merits, we conclude that the 1992 Action cannot operate with claim-preclusive effect on the 2017 Action. We, thus, reverse the district court’s order dismissing the 2017 Action’s claims against Officer Spencer. Because we reverse that order based on the “on the merits” element of claim preclusion, we need not and do not address whether the district court’s order was also erroneous because it determined that the 1992 Action provided Mr. Johnson with a “full and fair opportunity to litigate.”

III. CONCLUSION

We acknowledge the terrible reality that Mr. Johnson must have faced during the twenty-four years that he was wrongly incarcerated. As the Supreme Court has stated, however, the doctrine of claim preclusion “serves vital public interests beyond any individual judge’s ad hoc determination of the equities in a particular case.” Thus, for the reasons we have provided, in the 2017 Action, we affirm the dismissal of the claims against the Estate and Cheyenne, but reverse the dismissal of the claims against Officer Spencer and remand for further proceedings consistent with this opinion.

Hernandez v. Asset Acceptance, LLC, 970 F.Supp.2d 1194 (D. Colo. 2013)

MARCIA S. KRIEGER, Chief Judge.

Ms. Hernandez claims that the Defendant, a debt collection agency, violated the Fair Debt Collection Practice Act (FDCPA), when it failed to communicate to Experian, a credit reporting agency that she disputed a debt she had incurred. Ms. Hernandez allegedly incurred a debt with Xcel Energy and defaulted on the debt. The account was transferred to the Defendant for collection. In May 2011, Ms. Hernandez reviewed a copy of her Experian credit report and saw the Defendant’s entry for the Xcel account on the report. On May 5, 2011, she called the Defendant to dispute the account. In June, August, October, and November 2011, the Defendant allegedly failed to communicate to Experian that Ms. Hernandez’s Xcel Energy account was disputed. Ms. Hernandez asserts that this “Complaint and Jury Demand only seeks relief for activity that occurred after August 7, 2011.” She seeks statutory damages available under the FDCPA, as well as attorney fees and costs.

By way of additional background, the Court notes that on July 1, 2011, Ms. Hernandez initiated Civil Action No. 11-cv-01729 (Hernandez I). In that case, Ms. Hernandez claimed that in June 2011, the Defendant violated the FDCPA by failing to report the Xcel Energy account as disputed between May 5, 2011 and July 1, 2011. She alleged violations of the FDCPA. A two-day jury trial was held on September 10, 2012. The jury returned a verdict in favor of the Defendant. Final judgment was entered in Hernandez I on September 21, 2012.

As relevant here, the Defendant moved to dismiss Ms. Hernandez’s claims in this case under the doctrine of res judicata, also referred to as claim preclusion. The matter was referred to the Magistrate Judge, who recommends that the motion be granted. The Magistrate Judge found that Ms. Hernandez’s claims must be dismissed because the claims asserted in this case arise from the same transaction, or series of transactions, as the claims asserted in _Hernandez I.

Ms. Hernandez objects to the Magistrate Judge’s factual conclusion that her claims in this case arise out of the same transaction as those asserted in Hernandez I. Specifically, she argues that her claims here can be proven with evidence of new facts that occurred after Hernandez I. She alleges that here, she can rely on pleadings filed in Hernandez I to establish that she disputed the account, rather than rely on evidence of the May 5, 2011 phone call. She argues that because Hernandez I occurred after the conduct she alleged in that action, her claims in this case rely on independent facts.

“Under res judicata, or claim preclusion, a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in the prior action.” Claim preclusion requires a judgment on the merits in an earlier action, identity of the parties in the two suits, and identity of the cause of action in both suits. To determine whether the claims in two suits are identical, it must be determined whether the claims arise out of the same transaction, or series of connected transactions. “A new action will be permitted only where it raises new and independent claims, not part of the previous transaction, based on the new facts.”

Upon de novo review of the Recommendation, the Court reaches the same conclusions articulated in the Recommendation for substantially the same reasons. Contrary to Ms. Hernandez’s view, her claims in this action are not independent simply because they allege conduct that occurred after Hernandez I. Even if she were to rely on pleadings in that case to establish that she disputed the account, the pleadings depend on the fact of the May 5, 2011 phone call to establish the dispute. The claims here relate to the same disputed account, and they involve separate instances of the same course of conduct by the Defendant — that is, the Defendant’s failure to report the account as disputed after the May 5, 2011 phone call. Thus, although the Defendant’s conduct in August, October, and November 2011 could have amounted to additional violations of the FDCPA, those violations are not independent from the claims at issue in _Hernandez I.

Finally, the Court sees no reason why Ms. Hernandez could not have moved to amend her complaint in Hernandez I to include allegations of the conduct that occurred in August, October, and November 2011. The trial in Hernandez I occurred over a year after she filed her complaint in that case. Had she amended her complaint in Hernandez I, the jury could have been called upon to determine whether the Defendant’s additional communications with Experian constituted violations of the FDCPA. A plaintiff cannot “avoid supplementing his complaint with facts that are part of the same transaction asserted in the complaint, in the hope of bringing a new action arising out of the same transaction on some later occasion.”

For the forgoing reasons, the Plaintiff’s Objections are OVERRULED and the Recommendation is ADOPTED to the extent it recommends that the Plaintiff’s claims be dismissed. The Defendant’s Motion to Dismiss is GRANTED and the Plaintiff’s claims in this case are DISMISSED in their entirety, with prejudice. The Clerk of the Court shall close this case.

Taylor v. Sturgell, 553 U.S. 880 (2008)

Justice GINSBURG delivered the opinion of the Court.

“It is a principle of general application in Anglo-American jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.” Several exceptions, recognized in this Court’s decisions, temper this basic rule. In a class action, for example, a person not named as a party may be bound by a judgment on the merits of the action, if she was adequately represented by a party who actively participated in the litigation. In this case, we consider for the first time whether there is a “virtual representation” exception to the general rule against precluding nonparties. Adopted by a number of courts, including the courts below in the case now before us, the exception so styled is broader than any we have so far approved.

The virtual representation question we examine in this opinion arises in the following context. Petitioner Brent Taylor filed a lawsuit under the Freedom of Information Act seeking certain documents from the Federal Aviation Administration. Greg Herrick, Taylor’s friend, had previously brought an unsuccessful suit seeking the same records. The two men have no legal relationship, and there is no evidence that Taylor controlled, financed, participated in, or even had notice of Herrick’s earlier suit. Nevertheless, the D.C. Circuit held Taylor’s suit precluded by the judgment against Herrick because, in that court’s assessment, Herrick qualified as Taylor’s “virtual representative.”

We disapprove the doctrine of preclusion by “virtual representation,” and hold, based on the record as it now stands, that the judgment against Herrick does not bar Taylor from maintaining this suit.

I

The Freedom of Information Act (FOIA or Act) accords “any person” a right to request any records held by a federal agency. No reason need be given for a FOIA request, and unless the requested materials fall within one of the Act’s enumerated exemptions, the agency must “make the records promptly available” to the requester. If an agency refuses to furnish the requested records, the requester may file suit in federal court and obtain an injunction “ordering the production of any agency records improperly withheld.”

The courts below held the instant FOIA suit barred by the judgment in earlier litigation seeking the same records. Because the lower courts’ decisions turned on the connection between the two lawsuits, we begin with a full account of each action.

A

The first suit was filed by Greg Herrick, an antique aircraft enthusiast and the owner of an F-45 airplane, a vintage model manufactured by the Fairchild Engine and Airplane Corporation (FEAC) in the 1930’s. In 1997, seeking information that would help him restore his plane to its original condition, Herrick filed a FOIA request asking the Federal Aviation Administration (FAA) for copies of any technical documents about the F-45 contained in the agency’s records.

To gain a certificate authorizing the manufacture and sale of the F-45, FEAC had submitted to the FAA’s predecessor, the Civil Aeronautics Authority, detailed specifications and other technical data about the plane. Hundreds of pages of documents produced by FEAC in the certification process remain in the FAA’s records. The FAA denied Herrick’s request, however, upon finding that the documents he sought are subject to FOIA’s exemption for “trade secrets and commercial or financial information obtained from a person and privileged or confidential”. In an administrative appeal, Herrick urged that FEAC and its successors had waived any trade-secret protection. The FAA thereupon contacted FEAC’s corporate successor, respondent Fairchild Corporation (Fairchild). Because Fairchild objected to release of the documents, the agency adhered to its original decision.

Herrick then filed suit in the U.S. District Court for the District of Wyoming. Challenging the FAA’s invocation of the trade-secret exemption, Herrick placed heavy weight on a 1955 letter from FEAC to the Civil Aeronautics Authority. The letter authorized the agency to lend any documents in its files to the public “for use in making repairs or replacement parts for aircraft produced by Fairchild.” This broad authorization, Herrick maintained, showed that the F-45 certification records held by the FAA could not be regarded as “secret” or “confidential” within the meaning of § 552(b)(4).

Rejecting Herrick’s argument, the District Court granted summary judgment to the FAA. The 1955 letter, the court reasoned, did not deprive the F-45 certification documents of trade-secret status, for those documents were never in fact released pursuant to the letter’s blanket authorization. The court also stated that even if the 1955 letter had waived trade-secret protection, Fairchild had successfully “reversed” the waiver by objecting to the FAA’s release of the records to Herrick.

On appeal, the Tenth Circuit agreed with Herrick that the 1955 letter had stripped the requested documents of trade-secret protection. But the Court of Appeals upheld the District Court’s alternative determination —i.e., that Fairchild had restored trade-secret status by objecting to Herrick’s FOIA request. On that ground, the appeals court affirmed the entry of summary judgment for the FAA.

In so ruling, the Tenth Circuit noted that Herrick had failed to challenge two suppositions underlying the District Court’s decision. First, the District Court assumed trade-secret status could be “restored” to documents that had lost protection. Second, the District Court also assumed that Fairchild had regained trade-secret status for the documents even though the company claimed that status only “after Herrick had initiated his request” for the F-45 records. The Court of Appeals expressed no opinion on the validity of these suppositions.

B

The Tenth Circuit’s decision issued on July 24, 2002. Less than a month later, on August 22, petitioner Brent Taylor—a friend of Herrick’s and an antique aircraft enthusiast in his own right—submitted a FOIA request seeking the same documents Herrick had unsuccessfully sued to obtain. When the FAA failed to respond, Taylor filed a complaint in the U.S. District Court for the District of Columbia. Like Herrick, Taylor argued that FEAC’s 1955 letter had stripped the records of their trade-secret status. But Taylor also sought to litigate the two issues concerning recapture of protected status that Herrick had failed to raise in his appeal to the Tenth Circuit.

After Fairchild intervened as a defendant, the District Court in D.C. concluded that Taylor’s suit was barred by claim preclusion; accordingly, it granted summary judgment to Fairchild and the FAA. The court acknowledged that Taylor was not a party to Herrick’s suit. However, it held that a nonparty may be bound by a judgment if she was “virtually represented” by a party.

The record before the District Court in Taylor’s suit revealed the following facts about the relationship between Taylor and Herrick: Taylor is the president of the Antique Aircraft Association, an organization to which Herrick belongs; the two men are “close associates”; Herrick asked Taylor to help restore Herrick’s F-45, though they had no contract or agreement for Taylor’s participation in the restoration; Taylor was represented by the lawyer who represented Herrick in the earlier litigation; and Herrick apparently gave Taylor documents that Herrick had obtained from the FAA during discovery in his suit.

Fairchild and the FAA conceded that Taylor had not participated in Herrick’s suit. The D.C. District Court determined, however, that Herrick ranked as Taylor’s virtual representative. Accordingly, the District Court held Taylor’s suit, seeking the same documents Herrick had requested, barred by the judgment against Herrick.

The D.C. Circuit affirmed.

We granted certiorari, to resolve the disagreement among the Circuits over the permissibility and scope of preclusion based on “virtual representation.”

II

The preclusive effect of a federal-court judgment is determined by federal common law. For judgments in federal-question cases— for example, Herrick’s FOIA suit—federal courts participate in developing “uniform federal rules” of res judicata, which this Court has ultimate authority to determine and declare. The federal common law of preclusion is, of course, subject to due process limitations.

Taylor’s case presents an issue of first impression in this sense: Until now, we have never addressed the doctrine of “virtual representation” adopted (in varying forms) by several Circuits and relied upon by the courts below. Our inquiry, however, is guided by well-established precedent regarding the propriety of nonparty preclusion. We review that precedent before taking up directly the issue of virtual representation.

A

The preclusive effect of a judgment is defined by claim preclusion and issue preclusion, which are collectively referred to as “res judicata.” Under the doctrine of claim preclusion, a final judgment forecloses “successive litigation of the very same claim, whether or not relitigation of the claim raises the same issues as the earlier suit.” Issue preclusion, in contrast, bars “successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment,” even if the issue recurs in the context of a different claim. By “precluding parties from contesting matters that they have had a full and fair opportunity to litigate,” these two doctrines protect against “the expense and vexation attending multiple lawsuits, conserve judicial resources, and foster reliance on judicial action by minimizing the possibility of inconsistent decisions.”

A person who was not a party to a suit generally has not had a “full and fair opportunity to litigate” the claims and issues settled in that suit. The application of claim and issue preclusion to nonparties thus runs up against the “deep-rooted historic tradition that everyone should have his own day in court.” Indicating the strength of that tradition, we have often repeated the general rule that “one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.”

B

Though hardly in doubt, the rule against nonparty preclusion is subject to exceptions. For present purposes, the recognized exceptions can be grouped into six categories.

First, “a person who agrees to be bound by the determination of issues in an action between others is bound in accordance with the terms of his agreement.” 1 Restatement (Second) of Judgments § 40, p. 390 (1980) (hereinafter Restatement). For example, “if separate actions involving the same transaction are brought by different plaintiffs against the same defendant, all the parties to all the actions may agree that the question of the defendant’s liability will be definitely determined, one way or the other, in a ‘test case.’”

Second, nonparty preclusion may be justified based on a variety of pre-existing “substantive legal relationships” between the person to be bound and a party to the judgment. Qualifying relationships include, but are not limited to, preceding and succeeding owners of property, bailee and bailor, and assignee and assignor. These exceptions originated “as much from the needs of property law as from the values of preclusion by judgment.”(n.8 in opinion) The substantive legal relationships justifying preclusion are sometimes collectively referred to as “privity.”The term “privity,” however, has also come to be used more broadly, as a way to express the conclusion that nonparty preclusion is appropriate on any ground. To ward off confusion, we avoid using the term “privity” in this opinion.

Third, we have confirmed that, “in certain limited circumstances,” a nonparty may be bound by a judgment because she was “adequately represented by someone with the same interests who was a party” to the suit. Representative suits with preclusive effect on nonparties include properly conducted class actions, and suits brought by trustees, guardians, and other fiduciaries.

Fourth, a nonparty is bound by a judgment if she “assumed control” over the litigation in which that judgment was rendered. Because such a person has had “the opportunity to present proofs and argument,” he has already “had his day in court” even though he was not a formal party to the litigation.

Fifth, a party bound by a judgment may not avoid its preclusive force by relitigating through a proxy. Preclusion is thus in order when a person who did not participate in a litigation later brings suit as the designated representative of a person who was a party to the prior adjudication. And although our decisions have not addressed the issue directly, it also seems clear that preclusion is appropriate when a nonparty later brings suit as an agent for a party who is bound by a judgment.

Sixth, in certain circumstances a special statutory scheme may “expressly foreclose successive litigation by nonlitigants. . . if the scheme is otherwise consistent with due process.” Examples of such schemes include bankruptcy and probate proceedings, and quo warranto⊕“Quo warranto is Latin for ‘by what warrant’ (or authority). A writ of quo warranto is a common law remedy which is used to challenge a person’s right to hold a public or corporate office. A state may also use a quo warranto action to revoke a corporation’s charter. When bringing a petition for writ of quo warranto, individual members of the public have standing as citizens and taxpayers.” Wex Legal Dictionary

actions or other suits that, “under the governing law, may be brought only on behalf of the public at large”.

III

Reaching beyond these six established categories, some lower courts have recognized a “virtual representation” exception to the rule against nonparty preclusion. Decisions of these courts, however, have been far from consistent. Some Circuits use the label, but define “virtual representation” so that it is no broader than the recognized exception for adequate representation. But other courts, including the Eighth, Ninth, and D.C. Circuits, apply multifactor tests for virtual representation that permit nonparty preclusion in cases that do not fit within any of the established exceptions.

The D.C. Circuit, the FAA, and Fairchild have presented three arguments in support of an expansive doctrine of virtual representation. We find none of them persuasive.

B

Fairchild and the FAA do not argue that the D.C. Circuit’s virtual representation doctrine fits within any of the recognized grounds for nonparty preclusion. Rather, they ask us to abandon the attempt to delineate discrete grounds and clear rules altogether. Preclusion is in order, they contend, whenever “the relationship between a party and a non-party is ‘close enough’ to bring the second litigant within the judgment.” Courts should make the “close enough” determination, they urge, through a “heavily fact-driven” and “equitable” inquiry. Only this sort of diffuse balancing, Fairchild and the FAA argue, can account for all of the situations in which nonparty preclusion is appropriate.

We reject this argument for three reasons. First, our decisions emphasize the fundamental nature of the general rule that a litigant is not bound by a judgment to which she was not a party. Accordingly, we have endeavored to delineate discrete exceptions that apply in “limited circumstances.” Respondents’ amorphous balancing test is at odds with the constrained approach to nonparty preclusion our decisions advance.

Our second reason for rejecting a broad doctrine of virtual representation rests on the limitations attending nonparty preclusion based on adequate representation. A party’s representation of a nonparty is “adequate” for preclusion purposes only if, at a minimum: (1) The interests of the nonparty and her representative are aligned; and (2) either the party understood herself to be acting in a representative capacity or the original court took care to protect the interests of the nonparty. In addition, adequate representation sometimes requires (3) notice of the original suit to the persons alleged to have been represented. In the class-action context, these limitations are implemented by the procedural safeguards contained in Federal Rule of Civil Procedure 23.

An expansive doctrine of virtual representation, however, would “recognize, in effect, a common-law kind of class action.” That is, virtual representation would authorize preclusion based on identity of interests and some kind of relationship between parties and nonparties, shorn of the procedural protections prescribed in Hansberry, Richards, and Rule 23. These protections, grounded in due process, could be circumvented were we to approve a virtual representation doctrine that allowed courts to “create de facto class actions at will.”

Third, a diffuse balancing approach to nonparty preclusion would likely create more headaches than it relieves. Most obviously, it could significantly complicate the task of district courts faced in the first instance with preclusion questions. An all-things-considered balancing approach might spark wide-ranging, time-consuming, and expensive discovery tracking factors potentially relevant under seven- or five-prong tests. And after the relevant facts are established, district judges would be called upon to evaluate them under a standard that provides no firm guidance.Preclusion doctrine, it should be recalled, is intended to reduce the burden of litigation on courts and parties. “In this area of the law,” we agree, “‘crisp rules with sharp corners’ are preferable to a round-about doctrine of opaque standards.”

C

Finally, the FAA maintains that nonparty preclusion should apply more broadly in “public law” litigation than in “private law” controversies. To support this position, the FAA offers two arguments. First, the FAA urges, our decision in Richards acknowledges that, in certain cases, the plaintiff has a reduced interest in controlling the litigation “because of the public nature of the right at issue.” When a taxpayer challenges “an alleged misuse of public funds” or “other public action,” we observed in Richards, the suit “has only an indirect impact on the plaintiff’s interests.” In actions of this character, the Court said, “we may assume that the States have wide latitude to establish procedures . . . to limit the number of judicial proceedings that may be entertained.”

Taylor’s FOIA action falls within the category described in Richards, the FAA contends, because “the duty to disclose under FOIA is owed to the public generally.” The opening sentence of FOIA, it is true, states that agencies “shall make information available to the public.” Equally true, we have several times said that FOIA vindicates a “public” interest. The Act, however, instructs agencies receiving FOIA requests to make the information available not to the public at large, but rather to the “person” making the request. Thus, in contrast to the public-law litigation contemplated in Richards, a successful FOIA action results in a grant of relief to the individual plaintiff, not a decree benefiting the public at large.

Furthermore, we said in Richards only that, for the type of public-law claims there envisioned, States are free to adopt procedures limiting repetitive litigation. In this regard, we referred to instances in which the first judgment foreclosed successive litigation by other plaintiffs because, “under state law, the suit could be brought only on behalf of the public at large.”Richards spoke of state legislation, but it appears equally evident that Congress, in providing for actions vindicating a public interest, may “limit the number of judicial proceedings that may be entertained.” It hardly follows, however, that this Court should proscribe or confine successive FOIA suits by different requesters. Indeed, Congress’ provision for FOIA suits with no statutory constraint on successive actions counsels against judicial imposition of constraints through extraordinary application of the common law of preclusion.

The FAA next argues that “the threat of vexatious litigation is heightened” in public-law cases because “the number of plaintiffs with standing is potentially limitless.” FOIA does allow “any person” whose request is denied to resort to federal court for review of the agency’s determination. Thus it is theoretically possible that several persons could coordinate to mount a series of repetitive lawsuits.

But we are not convinced that this risk justifies departure from the usual rules governing nonparty preclusion. First, stare decisis will allow courts swiftly to dispose of repetitive suits brought in the same circuit. Second, even when stare decisis is not dispositive, “the human tendency not to waste money will deter the bringing of suits based on claims or issues that have already been adversely determined against others.” This intuition seems to be borne out by experience: The FAA has not called our attention to any instances of abusive FOIA suits in the Circuits that reject the virtual representation theory respondents advocate here.

IV

For the foregoing reasons, we disapprove the theory of virtual representation on which the decision below rested. The preclusive effects of a judgment in a federal-question case decided by a federal court should instead be determined according to the established grounds for nonparty preclusion described in this opinion.

Although references to “virtual representation” have proliferated in the lower courts, our decision is unlikely to occasion any great shift in actual practice. Many opinions use the term “virtual representation” in reaching results at least arguably defensible on established grounds. In these cases, dropping the “virtual representation” label would lead to clearer analysis with little, if any, change in outcomes.

In some cases, however, lower courts have relied on virtual representation to extend nonparty preclusion beyond the latter doctrine’s proper bounds. We now turn back to Taylor’s action to determine whether his suit is such a case, or whether the result reached by the courts below can be justified on one of the recognized grounds for nonparty preclusion.

A

It is uncontested that four of the six grounds for nonparty preclusion have no application here: There is no indication that Taylor agreed to be bound by Herrick’s litigation, that Taylor and Herrick have any legal relationship, that Taylor exercised any control over Herrick’s suit, or that this suit implicates any special statutory scheme limiting relitigation. Neither the FAA nor Fairchild contends otherwise.

It is equally clear that preclusion cannot be justified on the theory that Taylor was adequately represented in Herrick’s suit. Nothing in the record indicates that Herrick understood himself to be suing on Taylor’s behalf, that Taylor even knew of Herrick’s suit, or that the Wyoming District Court took special care to protect Taylor’s interests. Under our pathmarking precedent, therefore, Herrick’s representation was not “adequate.”

That leaves only the fifth category: preclusion because a nonparty to an earlier litigation has brought suit as a representative or agent of a party who is bound by the prior adjudication. Taylor is not Herrick’s legal representative and he has not purported to sue in a representative capacity. He concedes, however, that preclusion would be appropriate if respondents could demonstrate that he is acting as Herrick’s “undisclosed agent.”

Respondents argue here, as they did below, that Taylor’s suit is a collusive attempt to relitigate Herrick’s action. The D.C. Circuit considered a similar question in addressing the “tactical maneuvering” prong of its virtual representation test. The Court of Appeals did not, however, treat the issue as one of agency, and it expressly declined to reach any definitive conclusions due to “the ambiguity of the facts.” We therefore remand to give the courts below an opportunity to determine whether Taylor, in pursuing the instant FOIA suit, is acting as Herrick’s agent. Taylor concedes that such a remand is appropriate.

We have never defined the showing required to establish that a nonparty to a prior adjudication has become a litigating agent for a party to the earlier case. Because the issue has not been briefed in any detail, we do not discuss the matter elaboratively here. We note, however, that courts should be cautious about finding preclusion on this basis. A mere whiff of “tactical maneuvering” will not suffice; instead, principles of agency law are suggestive. They indicate that preclusion is appropriate only if the putative agent’s conduct of the suit is subject to the control of the party who is bound by the prior adjudication.

B

On remand, Fairchild suggests, Taylor should bear the burden of proving he is not acting as Herrick’s agent. When a defendant points to evidence establishing a close relationship between successive litigants, Fairchild maintains, “the burden should shift to the second litigant to submit evidence refuting the charge” of agency. Fairchild justifies this proposed burden-shift on the ground that “it is unlikely an opposing party will have access to direct evidence of collusion.”

We reject Fairchild’s suggestion. Claim preclusion, like issue preclusion, is an affirmative defense. Ordinarily, it is incumbent on the defendant to plead and prove such a defense, and we have never recognized claim preclusion as an exception to that general rule. We acknowledge that direct evidence justifying nonparty preclusion is often in the hands of plaintiffs rather than defendants. In these situations, targeted interrogatories or deposition questions can reduce the information disparity. We see no greater cause here than in other matters of affirmative defense to disturb the traditional allocation of the proof burden.

Lee v. POW! Entertainment, Inc., 468 F.Supp.3d 1220 (C.D. Cal. 2020)

OTIS D. WRIGHT, II, United States District Judge.

I. INTRODUCTION

Defendant POW! Entertainment, Inc., (“POW”) filed a motion to dismiss the amended complaint filed by Plaintiff Joan Celia Lee (“JC Lee”). POW argues that JC Lee’s amended complaint is barred by the doctrines of res judicata, collateral estoppel, and statute of limitations. For the reasons discussed below, the Court GRANTS POW’s Motion to Dismiss.

II. FACTUAL BACKGROUND

A. Present Lawsuit

JC Lee is the daughter and trustee for the estate of comic book author Stan Lee. Stan Lee is responsible for co-creating comic book characters such as Spider-Man, the X-Men, Iron Man, and many others. POW, a Delaware corporation, claims that Stan Lee assigned to it the rights to his intellectual property.

JC Lee seeks to enforce the terms of an agreement made in 1998 (the “1998 Agreement”) between Stan Lee and Stan Lee Entertainment, Inc. (“SLEI”). Specifically, JC Lee contends that, under the terms of the 1998 Agreement, Stan Lee assigned full and complete title to his name, likeness, and creator rights to SLEI in perpetuity. As such, JC Lee seeks declaratory and injunctive relief that SLEI, owns the rights to Stan Lee’s intellectual property, name, and likeness, and asserts a cause of action against POW for cybersquatting in violation of 15 U.S.C. § 1125(d).

B. Factual Background

After departing from Marvel in August 1998, Stan Lee formed SLEI, to which he allegedly “conveyed clear title to his name, likeness and all creator rights” on October 15, 1998. In January 2001, Stan Lee accused Stan Lee Media, Inc. (“SLMI”), successor-in-interest to SLEI, of being “in complete breach of the salary and benefit provisions, inter alia, of the 1998 Agreement so that he was justified in terminating the agreement.” Subsequently, due to a lack of operating capital caused by a series of unfortunate events, SLMI filed for Chapter 11 bankruptcy.

Following the bankruptcy filing, in 2001, Stan Lee and others formed POW. JC Lee alleges that the other founders of POW manipulated Stan Lee into transferring ownership of his creator rights and rights to his name and likeness “three years after he divested himself of any further legal interest in those rights” to SLMI per the 1998 Agreement.

When Stan Lee died in November 2018, JC Lee, as his only heir and trustee of his estate, became the successor-in-interest of Stan Lee’s alleged obligations relating to the 1998 Agreement. She files suit “to ensure the Lee Trust is able to perform the duties it assumed under Stan Lee’s 1998 Agreement and act in accord with the obligations under the Assignment by obtaining a Declaratory Judgment to the effect all rights, title and interest to Stan Lee’s Name and likeness and Brand, along with copyrights and trademarks now reside with SLEI in association with the Lee Trust.”

C. Prior Litigation

The 1998 Agreement between Stan Lee and SLMI has been the subject of numerous cases in federal courts throughout the country. See Abadin v. Marvel Entm’t, Inc.,; Lee v. Marvel Enters., Inc.; Stan Lee Media Inc. v. Lee (“SLM I”); Stan Lee Media, Inc. v. Walt Disney Co. (“SLM II”); _Disney Enters., Inc. v. Entm’t Theatre Grp.

Notably, in 2010, the Southern District of New York held that the 1998 Agreement was terminated by Stan Lee in 2001 per his correspondence with SLMI indicating that SLMI breached the salary and benefit provisions in the agreement. Furthermore, the court held that the statute of limitations to challenge the termination had lapsed by 2010, and that, even if not expressly terminated, the 1998 Agreement had expired in 2005 pursuant to California Labor Code section 2855a, which limits the duration of personal services contracts to seven years.

In 2012, Judge Wilson of the Central District of California addressed the 1998 Agreement as well. In that action, SLMI sued Stan Lee and others alleging that Stan Lee and Marvel were infringing on the 1998 Agreement because Stan Lee had “assigned all copyrights and trademarks associated with all characters and comic books that he authored, including the iconic characters that he created during his tenure at Marvel” to SLMI. The court granted defendants’ motion to dismiss on the grounds that SLMI’s claims were barred by res judicata. Tellingly, the court concluded “that there is a compelling public interest in bringing this matter to a close.”

In 2013, the District of Colorado cited the aforementioned cases and similarly held that claims to enforce the 1998 Agreement were precluded by collateral estoppel.

Despite the numerous failed attempts to enforce the 1998 Agreement, SLMI allegedly filed suit against Stan Lee’s estate and reached a settlement that was adopted by a court, although she fails to provide further details. JC Lee now files this suit to satisfy the estate’s obligation under the terms of that settlement to “correct the breach of the agreement” and “remedy the results of the various invalid assignments made by Stan Lee.” The Court infers that SLMI has entered into a settlement prompting JC Lee to file this suit for declaratory relief, though neither the substance of the settlement nor the judgment have been provided to the Court.

III. MOTION TO DISMISS

B. Res Judicata

POW moves to dismiss all of JC Lee’s claims arguing that her claims are barred by res judicata, also known as claim preclusion. Res judicata bars lawsuits based on “any claims that were raised or could have been raised in a prior action.” Res judicata applies to bar a suit where there is “(1) an identity of claims; (2) a final judgment on the merits; and (3) identity or privity between parties.”

3. Identity or Privity Between Parties

Third, the parties in the current action must be identical to or in privity with the parties from the prior actions. Abadin was filed by SLMI’s shareholders derivatively on behalf of SLMI against Marvel Entertainment, Inc. and others. In SLMI II, SLMI filed suit against the Walt Disney Corporation and others. In the matter before the Court, JC Lee, in her role as the trustee of Stan Lee’s estate, files suit against POW. As the parties are not identical, they must be in privity for res judicata to apply. “Privity may exist if there is substantial identity between parties, that is, when there is sufficient commonality of interest.” The Ninth Circuit has stated that “privity is a flexible concept dependent on the particular relationship between the parties.” For example, “privity between parties exists when a party is so identified in interest with a party to former litigation that he represents precisely the same right in respect to the subject matter involved.”

Here, JC Lee asserts that she was not a party to the prior suits and argues, without support, that she is not in privity with SLMI. However, she concedes that she has “joined forces” with SLMI and is the successor in interest to Stan Lee, the assignor of SLMI’s rights per the parties to the 1998 Agreement. Indeed, JC Lee alleges that legal title to Stan Lee’s “name and likeness and creator rights” remain with SLMI and files this suit seeking declaratory relief of SLMI’s rights. JC Lee seeks to enforce the same contractual provision as in Abadin and SLMI, making the same argument that by signing the 1998 Agreement, Stan Lee assigned his intellectual property to SLMI, and seeks the same relief. Thus, JC Lee and SLMI are in privity.

Even where parties are in privity, the Court must consider whether the interests of the party absent in the prior action were adequately represented. In Headwaters Inc., the Ninth Circuit considered the notice the nonparty had and the level of protection the district court afforded the nonparty’s interests. Here, JC Lee, a nonparty in Abadin and SLMI, asserts that her interest is to “vindicate and clear title to Stan Lee’s intellectual property” as assigned by the 1998 Agreement. As the prior courts considered this very question and JC Lee is no stranger to this dispute, JC Lee’s interests were adequately represented. Accordingly, the Court finds the third factor satisfied.

As POW has established all three factors, the Court finds that all claims in this matter are barred by res judicata. Accordingly, the Court GRANTS the motion to dismiss. The Court DIMISSES WITH PREJUDICE all claims in the FAC.

Passaro v. Virginia, 935 F.3d 243 (4th Cir. 2019)

RICHARDSON, Circuit Judge

Antonio Passaro Jr. is a former Special Agent with the Virginia State Police. He claims that he faced unlawful discrimination based on his mental disability (post-traumatic stress disorder) and national origin (Italian-American). He also claims that he was unlawfully fired in retaliation for filing a complaint with the Equal Employment Opportunity Commission (“EEOC”). This conduct, he claims, violated the Americans with Disabilities Act of 1990 (“ADA”) and Title VII of the Civil Rights Act of 1964 (“Title VII”). He has sued the Commonwealth of Virginia and the Virginia Department of State Police (together, “the Commonwealth”), seeking relief that includes compensatory damages, reinstatement, and back pay.

The district court dismissed Passaro’s ADA claim, concluding that it was barred by state sovereign immunity. The court then granted summary judgment for the Commonwealth on the Title VII claims, concluding they were barred by the claim-preclusive effect of a state-court judgment upholding the outcome of an administrative grievance Passaro had filed. We affirm the district court’s dismissal of the ADA claim because the Commonwealth has not waived its sovereign immunity from that claim. But we reverse the district court’s decision that claim preclusion bars Passaro’s Title VII claims.

I.

Passaro worked as a Trooper with the Department of State Police until his promotion to Special Agent. In 2008, he transferred to the department’s High Tech Crimes Unit, where he investigated child-pornography cases. Starting in 2010, he began receiving disciplinary notices for infractions arising from his alleged failure to follow proper procedures and to manage his caseload. The episode that ultimately led to Passaro’s termination was an investigation he conducted in April and May 2012, which the department claims he bungled.

In July 2012, a doctor diagnosed Passaro with post-traumatic stress disorder arising from his frequent exposure to images of child pornography at work. Passaro sought a transfer from High Tech Crimes, which he claims was not granted.

On February 6, 2013, Passaro learned that he was being recommended for demotion from Special Agent back down to Trooper. Two days later, Passaro filed a complaint with the EEOC, asserting that the department had failed to make reasonable accommodations for his post-traumatic stress disorder and had harassed and discriminated against him based on his disability and national origin.

In March 2013, Passaro was fired. He then filed a grievance with Virginia’s Office of Employment Dispute Resolution under Virginia Code § 2.2-3003. He claimed that his discipline and termination were unjustified, and also that he had been the victim of discrimination and harassment. The grievance was assigned to a hearing officer, who promptly held a hearing and issued a decision that largely focused on whether Passaro’s discipline comported with internal department policies. Despite overturning some of the disciplinary action against Passaro, the hearing officer upheld Passaro’s termination.

Passaro sought review of the hearing officer’s ruling. He filed administrative appeals, which were denied. Passaro also appealed to a Virginia state court for review of whether the grievance decision was “contradictory to law” under Virginia Code § 2.2-3006(B). The court largely rejected Passaro’s arguments but concluded the hearing officer had overlooked certain testimony. On remand, the hearing officer affirmed his earlier decision, and Passaro again filed administrative appeals that were denied. Passaro returned to state court, which this time affirmed. Passaro then appealed to Virginia’s intermediate appellate court, which affirmed. His state-court appeals finally concluded in May 2018, when the Virginia Supreme Court declined Passaro’s request for rehearing.

In November 2016, while those appeals were ongoing, Passaro brought the instant action in Virginia state court against the Commonwealth. His complaint asserted “unlawful discrimination, harassment and retaliation,” as well as improper denials of his “requests for reasonable accommodations.” The Commonwealth timely removed the case to federal district court, asserting federal question jurisdiction based on the Title VII claims.

The Commonwealth then moved to dismiss, and the district court granted the motion in part. It dismissed Passaro’s ADA claim, which it concluded was barred by state sovereign immunity. It also dismissed Passaro’s Title VII claim for national-origin discrimination but gave him leave to replead. Passaro filed an amended complaint, which the Commonwealth answered, asserting numerous defenses including res judicata. The parties then consented to have the matter proceed before a magistrate judge for all purposes.

Before the magistrate judge, the Commonwealth sought to stay this action pending final resolution of Passaro’s state-court appeals, arguing that the state-court judgment could have preclusive effect on this case. Passaro responded that, while he disagreed that the state-court action would have any preclusive effect, he did not object to a stay. The court granted the stay, which remained in place until May 2018.

After the stay was lifted, the Commonwealth moved for summary judgment, arguing that the state-court proceedings had claim-preclusive effect on Passaro’s discrimination and retaliation claims under Title VII. The district court agreed and entered judgment for the Commonwealth.

Passaro timely appeals. He argues that the district court erred in dismissing his ADA claim because the Commonwealth has waived its state sovereign immunity. He also argues that claim preclusion does not bar his Title VII claims, asserting that the Commonwealth also waived this defense and, alternatively, that claim preclusion does not apply.

III.

We reverse the district court’s ruling at summary judgment that claim preclusion bars Passaro’s Title VII claims. State law governs whether a prior state-court judgment has issue- or claim-preclusive effect on a Title VII action. Under Virginia law, it “is firmly established that the party who asserts the defenses of res judicata or collateral estoppel has the burden of proving by a preponderance of the evidence that the claim or issue is precluded by a prior judgment.” Here, the Commonwealth asserts that Passaro could have litigated his claims of discrimination and retaliation through the state grievance process, meaning that the state-court judgment (which affirmed the decision on Passaro’s grievance) has claim-preclusive effect barring his Title VII claims in full. We disagree.

Under Virginia’s law of claim preclusion, parties “may not relitigate ‘the same cause of action or any part thereof which could have been litigated in the previous action.’” “While ostensibly a broad proposition, claim preclusion nonetheless is limited by longstanding principles.” In this case, the Commonwealth’s claim-preclusion defense runs afoul of one such principle: if procedural rules prevented the plaintiff from asserting all his claims for relief in a single case, then claim preclusion does not bar the plaintiff from bringing a second case to seek the relief he could not obtain in the first.

The breadth of claim preclusion has long turned on the plaintiff’s ability to seek comprehensive relief in a single action. We see this most clearly in the historical division between law and equity, which often afforded different remedies on the same facts:

So long as law and equity were administered by separate courts, or by different “sides” of the same court, a first proceeding at law or in equity often could be followed by a second proceeding in equity or at law. A party who lost an action at law on a contract, for instance, might undo the law judgment by securing reformation in a subsequent suit in equity. A court of law, on the other hand, might cheerfully grant a damages remedy after denial of an equitable remedy on discretionary grounds. Much similar duplication of litigation occurred.

Even where an equity court could award incidental legal relief, such as damages, claim preclusion often did not bar a later action at law because it was thought unfair to force a litigant to seek damages in equity where he had no right to a jury trial. Thus, a suit in equity generally lacked preclusive effect on a later action at law “unless the very matter in controversy in the pending action was decided in the prior suit.”

These limitations on claim preclusion became outmoded as joinder rules became less restrictive. Today, plaintiffs can usually seek all available relief in a single suit. Reflecting this fact, the modern trend— and the one adopted by the Second Restatement of Judgments—is to expand claim preclusion to cover all claims arising from the same “transaction” underlying the prior action. The Virginia Supreme Court adopted a similar transactional approach in 2006 when it promulgated Rule 1:6, which provides that all claims relating to the “same conduct, transaction or occurrence” fall within the scope of claim preclusion. That holds true “whether or not the legal theory or rights asserted in the second or subsequent action were raised in the prior lawsuit, and regardless of the legal elements or the evidence upon which any claims in the prior proceeding depended, or the particular remedies sought.” The rule provides only one narrow exception relating to certain mechanic’s lien remedies.

Despite Rule 1:6’s sweeping and mostly unqualified language, where joinder remains limited, so does the scope of claim preclusion. Even under Rule 1:6, claim preclusion remains “the stepchild of pleading and joinder rules” and “largely depends on which claims could have been brought” in the earlier action. Indeed, Virginia’s Supreme Court—whose guidance we must faithfully apply in interpreting the rule—has held that “all of the ordinary caveats to res judicata apply to Rule 1:6’s transactional approach.”

One well-recognized caveat is that the transactional approach assumes “no formal barriers in the way of a litigant’s presenting to a court in one action the entire claim including any theories of recovery or demands for relief that might have been available to him under applicable law.” “When such formal barriers in fact existed and were operative against a plaintiff in the first action, it is unfair to preclude him from a second action in which he can present those phases of the claim which he was disabled from presenting in the first.”

Here, Passaro could not have presented his entire case in one action. Virginia’s grievance procedures offer substantive claims that employees cannot pursue in a typical civil action. In particular, the grievance process appears to be the only mechanism by which a Virginia state employee can have disciplinary action overturned for violating internal policies of the state agency that employed him. And a Title VII action offers compensatory damages that are unavailable through the grievance process. Virginia’s administrative grievance procedures forbid damages awards, instead permitting limited monetary remedies such as back pay and, in some cases, attorney’s fees. Title VII affords compensatory damages for intentional discrimination that represent a distinct form of relief from back pay, and encompass distinct harms such as emotional distress. Thus, neither the grievance process nor a Title VII lawsuit offered a single proceeding where Passaro could litigate all his claims for relief.

Nor can we conclude, at least based on the record before us, that Passaro could have asserted a Title VII claim for money damages as part of the subsequent state-court action appealing the grievance decision. The statutory procedures governing grievance appeals suggest that they cannot feasibly be joined to a Title VII action seeking damages. There is no jury, and the deadlines are too rapid to accommodate a typical civil action: the state court must hold a hearing within 30 days of receiving the grievance record and must then decide the case within 15 days of the hearing. And the Commonwealth conceded at oral argument that there is no basis to believe that, when an employee appeals an administrative grievance decision to state court, he can join a claim for damages to the agency-review action.

Because Passaro could not have sought money damages in the prior suit, claim preclusion does not bar him from seeking money damages in this federal action. And he has done just that: his prayer for relief includes a request for compensatory damages up to the statutory maximum. Thus, the Commonwealth did not meet its burden to establish that claim preclusion barred Passaro’s claim in full, and we must reverse the district court’s grant of summary judgment to the Commonwealth.

The Commonwealth, like the district court, relies on language in Rule 1:6 stating that claim preclusion applies “regardless of the particular remedies sought” in the prior proceeding. This argument misapprehends the meaning of the quoted text. Rule 1:6 provides that a litigant cannot limit the scope of claim preclusion by choosing to seek only particular remedies in the first action. Yet there is a critical distinction between the remedies sought and the remedies available. A litigant has no right to split his claim by voluntarily choosing to seek only some of the remedies available to him, but that is not really a choice when it is thrust upon him by procedural rules. Thus, under traditional claim-preclusion principles, a litigant who had to split his claim to preserve his rights may return to court to seek remedies that were unavailable to him in the first proceeding. Virginia’s Supreme Court has made clear that Rule 1:6 preserves this and other well-recognized limitations on the scope of claim preclusion.

Ultimately, this result is consistent with basic fairness. If claim preclusion applied in full, then a litigant in Passaro’s shoes would face a difficult choice. He would either have to assert all his claims through the grievance proceeding, forgoing his ability to obtain compensatory damages (as well as his right to a jury trial), or rely solely on a traditional civil action, giving up his right to appeal the police department’s grievance decision. The common law does not sanction this result, which lets procedural rules deprive a litigant of his substantive rights. Virginia law, we conclude, follows the common law in this regard.

That does not necessarily mean giving litigants like Passaro a second bite at the apple. If Passaro raised issues about discrimination and retaliation during the grievance process, and those issues were actually decided, then issue preclusion may bar relitigating them. We do not decide the availability or scope of issue preclusion, which is not before us. Moreover, claim preclusion could still conceivably bar Passaro’s Title VII action to the extent he seeks remedies (such as reinstatement and back pay) that were available through the grievance process. Because the Commonwealth has not advanced that more limited claim-preclusion argument, we do not address it. We hold merely that claim preclusion does not bar Passaro’s Title VII claims in full—that is, even for compensatory damages unavailable in the prior suit—which means that the district court erred in dismissing them on that ground.

Parklane Hosiery v. Shore, 439 U.S. 322 (1979)

Justice Stewart delivered the opinion of the Court.

This case presents the question whether a party who has had issues of fact adjudicated adversely to it in an equitable action may be collaterally estopped from relitigating the same issues before a jury in a subsequent legal action brought against it by a new party.

The respondent brought this stockholder’s class action against the petitioners in a Federal District Court. The complaint alleged that the petitioners, Parklane Hosiery Co., Inc. (Parklane), and 13 of its officers, directors, and stockholders, had issued a materially false and misleading proxy statement in connection with a merger. The proxy statement, according to the complaint, had violated §§ 14 (a), 10 (b), and 20 (a) of the Securities Exchange Act of 1934, as well as various rules and regulations promulgated by the Securities and Exchange Commission (SEC). The complaint sought damages, rescission of the merger, and recovery of costs.

Before this action came to trial, the SEC filed suit against the same defendants in the Federal District Court, alleging that the proxy statement that had been issued by Parklane was materially false and misleading in essentially the same respects as those that had ben alleged in the respondent’s complaint. Injunctive relief was requested. After a 4-day trial, the District Court found that the proxy statement was materially false and misleading in the respects alleged, and entered a declaratory judgment to that effect. The Court of Appeals for the Second Circuit affirmed this judgment.

The respondent in the present case then moved for partial summary judgment against the petitioners, asserting that the petitioners were collaterally estopped from relitigating the issues that had been resolved against them in the action brought by the SEC.(n. 2 in Opinion) A private plaintiff in an action under the proxy rules is not entitled to relief simply by demonstrating that the proxy solicitation was materially false and misleading. The plaintiff must also show that he was injured and prove damages. Since the SEC action was limited to a determination of whether the proxy statement contained materially false and misleading information, the respondent conceded that he would still have to prove these other elements of his prima facie case in the private action. The petitioners’ right to a jury trial on those remaining issues is not contested.

The District Court denied the motion on the ground that such an application of collateral estoppel would deny the petitioners their Seventh Amendment right to a jury trial. The Court of Appeals for the Second Circuit reversed, holding that a party who has had issues of fact determined against him after a full and fair opportunity to litigate in a nonjury trial is collaterally estopped from obtaining a subsequent jury trial of these same issues of fact. The appellate court concluded that “the Seventh Amendment preserves the right to jury trial only with respect to issues of fact, and once those issues have been fully and fairly adjudicated in a prior proceeding, nothing remains for trial, either with or without a jury.” Because of an intercircuit conflict, we granted certiorari.

I

The threshold question to be considered is whether, quite apart from the right to a jury trial under the Seventh Amendment, the petitioners can be precluded from relitigating facts resolved adversely to them in a prior equitable proceeding with another party under the general law of collateral estoppel. Specifically, we must determine whether a litigant who was not a party to a prior judgment may nevertheless use that judgment “offensively” to prevent a defendant from relitigating issues resolved in the earlier proceeding.(n.4 in Opinion) In this context, offensive use of collateral estoppel occurs when the plaintiff seeks to foreclose the defendant from litigating an issue the defendant has previously litigated unsuccessfully in an action with another party. Defensive use occurs when a defendant seeks to prevent a plaintiff from asserting a claim the plaintiff has previously litigated and lost against another defendant.

A

Collateral estoppel, like the related doctrine of res judicata,(n.5 in Opinion) Under the doctrine of res judicata, a judgment on the merits in a prior suit bars a second suit involving the same parties or their privies based on the same cause of action. Under the doctrine of collateral estoppel, on the other hand, the second action is upon a different cause of action and the judgment in the prior suit precludes relitigation of issues actually litigated and necessary to the outcome of the first action.

has the dual purpose of protecting litigants from the burden of relitigating an identical issue with the same party or his privy and of promoting judicial economy by preventing needless litigation. Until relatively recently, however, the scope of collateral estoppel was limited by the doctrine of mutuality of parties. Under this mutuality doctrine, neither party could use a prior judgment as an estoppel against the other unless both parties were bound by the judgment. Based on the premise that it is somehow unfair to allow a party to use a prior judgment when he himself would not be so bound,(n. 7 in Opinion) It is a violation of due process for a judgment to be binding on a litigant who was not a party or a privy and therefore has never has an opportunity to be heard.

the mutuality requirement provided a party who had litigated and lost in a previous action an opportunity to relitigate identical issues with new parties.

By failing to recognize the obvious difference in position between a party who has never litigated an issue and one who has fully litigated and lost, the mutuality requirement was criticized almost from its inception. Recognizing the validity of this criticism, the Court in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation abandoned the mutuality requirement, at least in cases where a patentee seeks to relitigate the validity of a patent after a federal court in a previous lawsuit has already declared it invalid. The “broader question” before the Court, however, was “whether it is any longer tenable to afford a litigant more than one full and fair opportunity for judicial resolution of the same issue.” The Court strongly suggested a negative answer to that question:

In any lawsuit where a defendant, because of the mutuality principle, is forced to present a complete defense on the merits to a claim which the plaintiff has fully litigated and lost in a prior action, there is an arguable misallocation of resources. To the extent the defendant in the second suit may not win by asserting, without contradiction, that the plaintiff had fully and fairly, but unsuccessfully, litigated the same claim in the prior suit, the defendant’s time and money are diverted from alternative uses—productive or otherwise—to relitigation of a decided issue. And, still assuming that the issue was resolved correctly in the first suit, there is reason to be concerned about the plaintiff’s allocation of resources. Permitting repeated litigation of the same issue as long as the supply of unrelated defendants holds out reflects either the aura of the gaming table or ‘a lack of discipline and of disinterestedness on the part of the lower courts, hardly a worthy or wise basis for fashioning rules of procedure.’ Although neither judges, the parties, nor the adversary system performs perfectly in all cases, the requirement of determining whether the party against whom an estoppel is asserted had a full and fair opportunity to litigate is a most significant safeguard.

B

The Blonder-Tongue case involved defensive use of collateral estoppel—a plaintiff was estopped from asserting a claim that the plaintiff had previously litigated and lost against another defendant. The present case, by contrast, involves offensive use of collateral estoppel—a plaintiff is seeking to estop a defendant from relitigating the issues which the defendant previously litigated and lost against another plaintiff. In both the offensive and defensive use situations, the party against whom estoppel is asserted has litigated and lost in an earlier action. Nevertheless, several reasons have been advanced why the two situations should be treated differently.

First, offensive use of collateral estoppel does not promote judicial economy in the same manner as defensive use does. Defensive use of collateral estoppel precludes a plaintiff from relitigating identical issues by merely “switching adversaries.” Thus defensive collateral estoppel gives a plaintiff a strong incentive to join all potential defendants in the first action if possible. Offensive use of collateral estoppel, on the other hand, creates precisely the opposite incentive. Since a plaintiff will be able to rely on a previous judgment against a defendant but will not be bound by that judgment if the defendant wins, the plaintiff has every incentive to adopt a “wait and see” attitude, in the hope that the first action by another plaintiff will result in a favorable judgment. Thus offensive use of collateral estoppel will likely increase rather than decrease the total amount of litigation, since potential plaintiffs will have everything to gain and nothing to lose by not intervening in the first action.

A second argument against offensive use of collateral estoppel is that it may be unfair to a defendant. If a defendant in the first action is sued for small or nominal damages, he may have little incentive to defend vigorously, particularly if future suits are not foreseeable. Allowing offensive collateral estoppel may also be unfair to a defendant if the judgment relied upon as a basis for the estoppel is itself inconsistent with one or more previous judgments in favor of the defendant.(n. 14 in Opinion) In Professor Currie’s familiar example, a railroad collision injures 50 passengers all of whom bring separate actions against the railroad. After the railroad wins the first 25 suits, a plaintiff wins in suit 26. Professor Currie argues that offensive use of collateral estoppel should not be applied so as to allow plaintiffs 27 through 50 automatically to recover.

Still another situation where it might be unfair to apply offensive estoppel is where the second action affords the defendant procedural opportunities unavailable in the first action that could readily cause a different result.(n.15 in Opinion) If, for example, the defendant in the first action was forced to defend in an inconvenient forum and therefore was unable to engage in full scale discovery or call witnesses, application of offensive collateral estoppel may be unwarranted. Indeed, differences in available procedures may sometimes justify not allowing a prior judgment to have estoppel effect in a subsequent action even between the same parties, or where defensive estoppel is asserted against a plaintiff who has litigated and lost. The problem of unfairness is particularly acute in cases of offensive estoppel, however, because the defendant against whom estoppel is asserted typically will not have chosen the forum in the first action.

C

We have concluded that the preferable approach for dealing with these problems in the federal courts is not to preclude the use of offensive collateral estoppel, but to grant trial courts broad discretion to determine when it should be applied. The general rule should be that in cases where a plaintiff could easily have joined in the earlier action or where, either for the reasons discussed above or for other reasons, the application of offensive estoppel would be unfair to a defendant, a trial judge should not allow the use of offensive collateral estoppel.

In the present case, however, none of the circumstances that might justify reluctance to allow the offensive use of collateral estoppel is present. The application of offensive collateral estoppel will not here reward a private plaintiff who could have joined in the previous action, since the respondent probably could not have joined in the injunctive action brought by the SEC even had he so desired. Similarly, there is no unfairness to the petitioners in applying offensive collateral estoppel in this case. First, in light of the serious allegations made in the SEC’s complaint against the petitioners, as well as the foreseeability of subsequent private suits that typically follow a successful Government judgment, the petitioners had every incentive to litigate the SEC lawsuit fully and vigorously. Second, the judgment in the SEC action was not inconsistent with any previous decision. Finally, there will in the respondent’s action be no procedural opportunities available to the petitioners that were unavailable in the first action of a kind that might be likely to cause a different result.

We conclude, therefore, that none of the considerations that would justify a refusal to allow the use of offensive collateral estoppel is present in this case. Since the petitioners received a “full and fair” opportunity to litigate their claims in the SEC action, the contemporary law of collateral estoppel leads inescapably to the conclusion that the petitioners are collaterally estopped from relitigating the question of whether the proxy statement was materially false and misleading.