Concept
Valid and Final Judgments
Claim preclusion
Valid and Final Judgments
Claim preclusion binds a claimant only to a judgment that is valid, final, and on the merits.1 The three requirements rest on one idea: a claimant who never had the chance to litigate fully should not lose the claim, and a judgment missing any of the three means that chance went unused.2 The labels mislead, because each means something narrower than it sounds. “Valid” does not mean correct, and “final” does not mean beyond all further review. This section covers validity and finality; the merits requirement comes next.
The two requirements ask different questions about case one. Validity looks back at the court that entered the judgment and asks whether it had authority to decide the dispute and bind the parties. Finality looks at the case itself and asks whether the court completed its adjudication. Neither asks whether the court ruled correctly, so the judge in case two never re-examines the merits of case one.
Where case one was decided in a state court, 28 U.S.C. § 1738 directs every court in the United States to give the judgment the same full faith and credit it has by law or usage in the courts of the state that rendered it.3 The rendering state's own law therefore governs what its judgment is worth, and a later section of this chapter explains how that choice of law works across court systems.
Validity of the Judgment
A judgment is valid for claim-preclusion purposes when the court that entered it had authority to decide the case, and the test goes no further. That authority has three parts: power over the subject matter, power over the defendant's person, and proper notice of the suit to the defendant.4 A judgment from a court with all three is valid even if the court got the case wrong.5
Excluding error from the test follows from what preclusion is for. If a mistake could strip a judgment of its preclusive force, the judge in case two would have to retry case one to learn whether it was decided correctly, and every loser could escape a judgment by arguing that it was wrong. The law sends error to the one place built to correct it, which is appeal in case one.
Angel v. Bullington shows how far the exclusion of error goes. The Court there treated the possibility that the North Carolina Supreme Court had erred on federal questions as “immaterial for purposes of res judicata,” because a higher court was available to adjudicate those questions authoritatively.6 The inquiry that remained was whether federal rights were necessarily involved and adjudicated in the state litigation.7
Rizzuto's case makes the same point. He tried his negligence claim, and judgment was entered for Allston on a jury verdict that Allston was not negligent. That judgment bars a second suit on the same claim even if evidence was wrongly excluded at the first trial; if the exclusion was improper, Rizzuto should have appealed in the first suit instead of relitigating in a second.8
A merely erroneous judgment therefore differs sharply from one that is void for want of authority. The erroneous judgment comes from a court that had power to decide the case and used it badly, and it precludes until an appellate court reverses it. The void judgment comes from a court with no power over the subject matter or the defendant, or from a proceeding in which the defendant never received proper notice, and historically such a judgment was treated as invalid and denied claim-preclusive effect.9 The distinction tracks what each defect means for the loser. Error is a flaw in the quality of a decision, and the same case supplies a remedy for it. Want of authority means the court could not bind the litigant at all, and a defendant who never came within its power or never heard of the suit has not had the contest that claim preclusion presupposes.
Jurisdictional defects defeat preclusion far less often than that historical rule suggests. Exceptions generally apply when the defendant responded to the lawsuit and both parties litigated without raising the jurisdictional problem.10
Every element except validity is satisfied: the claims are identical, the parties are the same, the federal court entered a final judgment, and a jury verdict is on the merits. Perry's attack nonetheless fails, because courts treat the judgment as valid.11
The reason lies in who could have spoken, and when. Both parties actively litigated and could have raised subject-matter jurisdiction at any time, including on appeal. If Perry could raise the defect only after losing, jurisdiction would become an option held in reserve, used or dropped depending on the verdict, and every judgment would stay open to attack forever. Courts have therefore concluded that claim preclusion applies even where the first court lacked subject-matter jurisdiction, unless its decision to hear the case “was a manifest abuse of authority” or would “substantially infringe the authority of another tribunal.”12 Restatement (Second) of Judgments § 12 comment d states that exception. An ordinary mistake about citizenship, found after a lost trial, meets neither description.
Both judgments came from courts that lacked authority, yet only Hale can resist. Perry litigated; Hale did not. A collateral attack on jurisdictional grounds succeeds only under limited conditions, such as when the defect was never raised in the first proceeding and the defendant defaulted there.13 A student who spots a jurisdictional flaw in case one and declares the judgment invalid has stopped one question too soon. The next question is whether the party resisting preclusion appeared and could have raised the flaw.
A separate problem arises when case one was decided in a state court that had no authority to hear a claim now asserted in a later federal action. Section 1738 sends the federal court to the rendering state's preclusion law.14 The Supreme Court addressed that setting and found that the rendering state's law did not provide for preclusion, but its analysis left open that another state's rule might, consistently with full faith and credit, provide for preclusion in this situation, and a federal court in case two would have to follow that rule.15 The result is surprising, because the principle that a party may not be precluded from raising in case two a claim the case-one court had no authority to hear looks like simple fairness.16 A first court's limited authority over one claim therefore does not settle the preclusion question by itself, and a later section returns to the point.
Finality of the Judgment
Finality, for res judicata purposes, “represents the completion of all steps in the adjudication of a claim by the court, short of execution,” in the words of Restatement (Second) of Judgments § 13; execution here means enforcing the judgment.18 The Supreme Court's general definition of a final decision points the same way: one that “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.”19 Finality therefore describes the condition of case one, not what case one decided. It raises two questions, to be taken in order: does a judgment exist yet, and if so, must it survive appeal before it can bar anything?
The stakes explain the care courts take. A final judgment bars claims that were never litigated, so long as they were available in the first suit. Schulansky, after recovering $7,000 from Ronan in a contract action, could not sue Ronan again on the contract, and res judicata also bars her from suing Ronan for fraud connected with the same addition work, though she never pleaded fraud, never tried the case on that theory, and never thought of it.20 A bar that sweeps so widely makes sense only after the first case is complete.
Until the trial court enters a judgment, there is nothing to apply. Suppose a federal court dismisses a plaintiff's fraud theory for failure to state a claim while the contract theory against the same defendant remains for trial. Nothing in the first case has yet completed the adjudication of the claim, so a separate suit on the fraud theory cannot be met with a res judicata plea based on the dismissal.21 The plea becomes available once the trial court enters judgment in the first case.
Parallel suits show the same point. Paolo files a contract claim against Dina in a New York state court and the identical claim against Dina in a Florida state court on the same day. Claim preclusion applies in neither case, because neither court has entered a judgment.22 The doctrine guards against a second judgment that is inconsistent with a first, and that risk cannot arise until a first judgment exists.23 Once one case reaches final judgment, that judgment can be asserted in the other.
A harder question comes after the trial court has entered judgment: must the loser's appeal run its course before the judgment counts as final? The majority of courts, including the federal courts, say no. A judgment is final for claim preclusion once the trial court enters it, even if the loser may still file a post-trial motion such as a motion for a new trial, and even if the loser has appealed.24 Restatement (Second) of Judgments § 13 comment f takes that position, and an appeal changes the result only if the appellate court vacates the judgment and orders a trial de novo.25 Courts favor this view for its efficiency, because the judgment bars further litigation at an earlier point in time.26 The mechanism is easy to see. If preclusion had to wait for every appeal, a loser could open a second front by refiling in another court while the appeal went forward, and the winner would defend one dispute in two places at once.
Because jurisdictions can differ on this point, a finality problem starts by identifying whose rule governs. When a state judgment is asserted elsewhere in the United States, § 1738 gives it the same full faith and credit it has in the courts of the rendering state, so that state's own law supplies the starting point.27
A second court that meets a pending appeal has more than one option. It may stay its action until the appeal from the first judgment is completed. Staying is the sounder practice, because it avoids giving binding effect to a judgment that may prove invalid or erroneous, but the court keeps discretion to apply res judicata and dismiss on the strength of the trial-court judgment alone.28
If the second court dismisses and the first judgment is later reversed, the dismissal is not permanent. A party can usually set it aside by a post-judgment motion or a timely appeal, as Federal Rule of Civil Procedure 60(b)(5) and Restatement (Second) of Judgments § 16 comment c contemplate.29 Two safeguards make early finality tolerable: the stay keeps a dismissal from resting on a judgment that may fall, and post-judgment relief undoes a dismissal that already rests on one that has.
Finality is only one gate, and a final judgment can still leave the preclusion question open. In Semtek Int'l Inc. v. Lockheed Martin Corp., a federal court sitting in diversity dismissed an action on the basis of a California statute of limitations, and the same plaintiff then renewed the suit against the same defendant in a Maryland state court, whose limitations period had not yet run.30 The Supreme Court held that Rule 41(b), which provides that an involuntary dismissal operates as an adjudication on the merits, did not bar the renewed action, because reading it to bar the Maryland courts would arguably violate the jurisdictional limitation of the Rules Enabling Act and would in many cases violate Erie's federalism principle.31 Rule 41(b)'s statement does not by itself decide whether a judgment is on the merits for claim-preclusion purposes, and jurisdictions may differ on whether dismissals such as those based on the statute of limitations count as on the merits.32 The merits requirement is the subject of the next section.