Res Judicata - Collateral Estoppel - Law of the Case

Introduction

No "do-overs". That is the gist of three closely related legal concepts rooted in principles of equity.1 "The doctrine of res judicata precludes parties or their privies from relitigating a cause of action that has been finally determined by a court of competent jurisdiction."2 Often described as "an aspect" of the doctrine of res judicata, "collateral estoppel, on the other hand, is concerned with the conclusiveness of a prior determination of a particular issue."3 Much narrower, "[u]nder [the law-of-the-case] doctrine, the decision of an appellate court, stating a rule of law necessary to the decision of the case, conclusively establishes that rule and makes it determinative of the rights of the same parties in any subsequent retrial or appeal in the same case."4 "The purposes of the double jeopardy and res judicata doctrines substantially overlap. We have explained that the purposes of the res judicata doctrine include prevent[ing] inconsistent judgments which undermine the integrity of the judicial system and preventing a person from being harassed by vexatious litigation."5

Res Judicata

Res judicata is a Latin phrase meaning "a matter already judged". Res judicata is an equitable doctrine which precludes parties from relitigating a cause of action or any issue that has been necessarily finally determined by a court. "The doctrine of res judicata precludes parties or their privies from relitigating a cause of action that has been finally determined by a court of competent jurisdiction. Any issue necessarily decided in such litigation is conclusively determined as to the parties or their privies if it is involved in a subsequent lawsuit on a different cause of action. The rule is based upon the sound public policy of limiting litigation by preventing a party who has had one fair trial on an issue from again drawing it into controversy. The doctrine also serves to protect persons from being twice vexed for the same cause. It must, however, conform to the mandate of due process of law that no person be deprived of personal or property rights by a judgment without notice and an opportunity to be heard."6

"In determining the validity of a plea of res judicata three questions are pertinent: Was the issue decided in the prior adjudication identical with the one presented in the action in question? Was there a final judgment on the merits? Was the party against whom the plea is asserted a party or in privity with a party to the prior adjudication?"7

Collateral Estoppel

The etymology of the word "estoppel" is from old French meaning "to stop up". While often described as an aspect of the doctrine of res judicata, collateral estoppel is not a complete bar to an action. "[T]he claim of collateral estoppel is concerned with the conclusiveness of a prior determination of a particular issue."8

In 2004 , the California Supreme Court compared these two doctrines. "As generally understood, [t]he doctrine of res judicata gives certain conclusive effect to a former judgment in subsequent litigation involving the same controversy. The doctrine has a double aspect. In its primary aspect, commonly known as claim preclusion, it operates as a bar to the maintenance of a second suit between the same parties on the same cause of action. In its secondary aspect, commonly known as collateral estoppel, [t]he prior judgment operates in a second suit based on a different cause of action as an estoppel or conclusive adjudication as to such issues in the second action as were actually litigated and determined in the first action.9

"The prerequisite elements for applying the doctrine to either an entire cause of action or one or more issues are the same: (1) A claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding."10

Privity

The concept of privity applies to both res judicata and collateral estoppel. "A privy is one who, after rendition of the judgment, has acquired an interest in the subject matter affected by the judgment through or under one of the parties, as by inheritance, succession, or purchase. The estoppel is mutual if the one taking advantage of the earlier adjudication would have been bound by it, had it gone against him."11

"Privity is a concept not readily susceptible of uniform definition. Traditionally it has been held to refer to an interest in the subject matter of litigation acquired after rendition of the judgment through or under one of the parties, as by inheritance, succession or purchase. The concept has also been expanded to refer to a mutual or successive relationship to the same rights of property, or to such an identification in interest of one person with another as to represent the same legal rights and, more recently, to a relationship between the party to be estopped and the unsuccessful party in the prior litigation which is 'sufficiently close' so as to justify application of the doctrine of collateral estoppel."12

"Likewise, the estoppel is not mutual since the party asserting the plea, not having been a party or in privity with a party to the former action, would not have been bound by it had it been decided the other way. The cases justify this exception on the ground that it would be unjust to permit one who has had his day in court to reopen identical issues by merely switching adversaries."13

In an insurance context, res judicata is not a two-way street: the policyholder may not assert res judicata against the insurer, but the insurer may assert it against the policyholder! "The criteria for determining who may assert a plea of res judicata differ fundamentally from the criteria for determining against whom a plea of res judicata may be asserted."14 "No satisfactory rationalization has been advanced for the requirement of mutuality. Just why a party who was not bound by a previous action should be precluded from asserting it as res judicata against a party who was bound by it is difficult to comprehend. Typical examples of such derivative liability are indemnitor and indemnitee. In [this situation] the party asserting the plea of res judicata was not a party to the previous action nor in privity with such a party. Likewise, the estoppel is not mutual since the party asserting the plea, not having been a party or in privity with a party to the former action, would not have been bound by it had it been decided the other way. The cases justify this exception on the ground that it would be unjust to permit one who has had his day in court to reopen identical issues by merely switching adversaries."15

Practice Pointer: The lack of mutuality may be turned on its head. While is it technically true that a policyholder is a party and the insurer is not a party in a liability action, if the insurer controls the defense through its dependent counsel, due process may be served for the insurer but not the policyholder. In the vast majority of instances where a policyholder and an insurer want to use collateral estoppel against each other, the insurer will have issued a reservation of rights. If the reservation of rights to deny coverage is related to the subject matter of the liability dispute and the insurer improperly seizes control of the defense through dependent counsel to a conclusion that is favorable to the insurer and unfavorable to the policyholder, it may be questionable that the insurer should be able to employ the doctrine of collateral estoppel against the policyholder. Where the insurer controls the policyholder's defense, it could be that the insurer did get its day in court (although not a technical party) while the policyholder did not get his day in court (although technically a party).

Law of the Case

The doctrine of law of the case is more limited than res judicata or collateral estoppel, in that it applies only to issues of law in the same action. "Under [the law-of-the-case] doctrine, the decision of an appellate court, stating a rule of law necessary to the decision of the case, conclusively establishes that rule and makes it determinative of the rights of the same parties in any subsequent retrial or appeal in the same case. The rule is not invoked where the sufficiency of the evidence necessary to sustain the judgment depends on the probative value or effect of the evidence itself, and the evidence in the second trial is changed. Similarly, the doctrine does not apply to points of law that might have been, but were not determined on the prior appeal. Recently, an additional reason for declining to apply the doctrine was announced: The primary purpose served by the law-of-the-case rule is one of judicial economy. Finality is attributed to an initial appellate ruling so as to avoid the further reversal and proceedings on remand that would result if the initial ruling were not adhered to in a later appellate proceeding. That reason for the rule is inoperative when the court hearing the subsequent appeal determines that there should be a reversal on a ground that was not considered on the prior appeal. The fact that reversal is necessary in any event frees us from the compulsion that the rule of law of the case might otherwise impose on us to follow a ruling in the prior appeal that we now perceive to be manifestly erroneous."16

"It is clear that the law of the case doctrine can apply to pretrial writ proceedings. When the appellate court issues an alternative writ, the matter is fully briefed, there is an opportunity for oral argument, and the cause is decided by a written opinion. The resultant holding establishes law of the case upon a later appeal from the final judgment."17

"Under the law of the case doctrine, when an appellate court states in its opinion a principle or rule of law necessary to the decision, that principle or rule becomes the law of the case and must be adhered to throughout [the case's] subsequent progress, both in the lower court and upon subsequent appeal. Absent an applicable exception, the doctrine requir[es] both trial and appellate courts to follow the rules laid down upon a former appeal whether such rules are right or wrong. As its name suggests, the doctrine applies only to an appellate court's decision on a question of law; it does not apply to questions of fact. [T]he law of the case doctrine is subject to an important limitation: it applie[s] only to the principles of law laid down by the court as applicable to a retrial of fact, and does not embrace the facts themselves. In other words, although an appellate court's legal determination constitutes the law of the case, upon a retrial that law must be applied by the trial court to the evidence presented upon the second trial. Thus, during subsequent proceedings in the same case, an appellate court's binding legal determination controls the outcome only if the evidence on retrial or rehearing of an issue is substantially the same as that upon which the appellate ruling was based. Where, on remand, there is a substantial difference in the evidence to which the [announced] principle of law is applied, the [doctrine] may not be invoked. . . . [N]othing in the law of the case doctrine itself limits the additional evidence that a party may introduce on retrial to that which could not have been presented at the first trial through the exercise of due diligence."18