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Semtek International Inc. v. Lockheed Martin Corp.

Supreme Court of the United States · 2001 · Civil Procedure

Civil ProcedureErie doctrineclaim preclusiondismissal with prejudicefederal common lawRule 41(b)adjudication upon the meritswith prejudice

Facts

Semtek sued Lockheed in California state court on contract-related and business tort claims, and Lockheed removed the case to federal court based on diversity. The California federal district court dismissed the action as barred by California's 2-year statute of limitations and stated that the dismissal was "on the merits and with prejudice." Semtek then sued on the same claims in Maryland state court, where Maryland's 3-year statute of limitations had not run. The Maryland courts dismissed on res judicata grounds based on the California federal judgment.

Issue

Is the claim-preclusive effect of a federal judgment in a diversity case dismissing an action on statute-of-limitations grounds determined by federal law that makes the judgment automatically claim preclusive, or by a federal rule that incorporates the law of the State in which the federal court sits? Does Rule 41(b)'s phrase "operates as an adjudication upon the merits" itself prescribe claim-preclusive effect in other courts?

Rule

The claim-preclusive effect of a dismissal by a federal court sitting in diversity is governed by federal common law. For diversity cases, the federal rule generally adopts the claim-preclusion law that would be applied by the courts of the State in which the federal court sits, unless that state law is incompatible with federal interests. Rule 41(b)'s statement that a dismissal operates as an "adjudication upon the merits" does not itself mean the judgment has claim-preclusive effect in other courts; it primarily means the dismissal bars refiling of the same claim in the same federal court unless the court specifies otherwise.

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

Nora Bennett sued Cedar Vale Equipment, Inc. in federal court in Chicago under diversity jurisdiction on an Illinois contract claim. The court dismissed the suit as untimely under Illinois law and stated that the dismissal was "with prejudice." Nora then filed the same claim in a Wisconsin state court, where a longer limitations period would allow the action to proceed.

What law should the Wisconsin court use to determine the claim-preclusive effect of the Chicago federal judgment?

Explanation. When the earlier judgment was entered by a federal court sitting in diversity, the source of law for its claim-preclusive effect is federal common law. For diversity cases, that federal rule generally adopts the claim-preclusion law of the State in which the federal court sat, here Illinois, unless that state law is incompatible with federal interests. Rule 41(b) does not by itself prescribe nationwide claim-preclusive effect in other courts, and full faith and credit provisions address state-court judgments, not this issue. (Derived from Semtek International Inc. v. Lockheed Martin Corp. (2001).)