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Parklane Hosiery Co. v. Shore

Supreme Court of the United States · 1979 · Civil Procedure

Civil Procedurecollateral estoppeloffensive non-mutual issue preclusionres judicatacollateral estoppelissue preclusionoffensive estoppelnon-mutual estoppel

Facts

Respondent sued Parklane Hosiery and related individuals, alleging they issued a materially false and misleading proxy statement in connection with a merger and seeking damages and other relief. Before that case came to trial, the SEC sued the same defendants in federal court for injunctive relief based on essentially the same alleged misrepresentations in the proxy statement. After a 4-day nonjury trial, the district court found the proxy statement materially false and misleading and entered a declaratory judgment, which the Second Circuit affirmed. Respondent then sought to prevent petitioners from relitigating those falsity issues in the private action.

Issue

May a plaintiff who was not a party to an earlier action use that earlier judgment offensively to collaterally estop a defendant from relitigating issues the defendant previously litigated and lost? If so, does applying such offensive non-mutual collateral estoppel after a prior equitable, nonjury proceeding violate the defendant's Seventh Amendment right to a jury trial in a later legal action?

Rule

In federal courts, offensive use of collateral estoppel is not categorically barred, but its application is left to the broad discretion of the trial court. The general rule is that offensive estoppel should not be allowed when the plaintiff could easily have joined the earlier action, or when application would otherwise be unfair to the defendant, including where the defendant lacked incentive to litigate vigorously, the prior judgment is inconsistent with earlier judgments, or the second action affords procedural opportunities likely to produce a different result. If the defendant had a full and fair opportunity to litigate the issue previously, applying such estoppel does not violate the Seventh Amendment merely because the first determination was made in equity and without mutuality of parties.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In federal court in Chicago, a regional housing regulator sued Lakefront Towers Management for injunctive relief, alleging that its tenant notices misrepresented residents' rights. After a bench trial, the regulator won findings that the notices were deceptive. Two months later, Maya Ortiz, one of dozens of tenants who had known about the regulator's suit and could have intervened without difficulty, filed her own damages action and sought to bar the company from relitigating deceptiveness.

Should the district court likely allow Maya's offensive use of non-mutual collateral estoppel on these facts?

Explanation. The majority held that offensive non-mutual collateral estoppel is not automatic; it is committed to the trial court's broad discretion. The general rule is that it should not be allowed when the later plaintiff could easily have joined the earlier action, because offensive estoppel otherwise encourages a wait-and-see approach. Here, Maya knew of the first suit and could have joined it without difficulty, so the court should likely deny offensive estoppel.