Special Contexts

Special Contexts

Parklane Hosiery Co. v. Shore lets a stranger to the first case use its result against a party who litigated and lost, provided preclusion is fair to that party. The earlier sections built that rule in layers: the elements of issue preclusion, the full and fair opportunity, the question of who may be bound, and the fairness screens applied to offensive use. Each layer pictured an ordinary litigant before an ordinary court. Two settings alter that picture, and in each the doctrine bends instead of giving way to a new rule.

In the first, the defendant is the United States. Between the same two parties the government is bound like any other litigant. What it escapes is the stranger's use of Parklane, a limit the first subsection develops.

In the second, the first tribunal is not a court. An agency adjudicator or an arbitrator resolves an issue after a hearing, and a later court must decide what that resolution is worth. The federal statute on state judgments speaks of the records and judicial proceedings of courts, so its words do not settle the question.¹ The answer comes instead from the concern that ran through the earlier sections: whether the process that produced the finding gave the party a full and fair chance to contest it.

The Federal Government

Parklane Hosiery Co. v. Shore approved a stranger's offensive use of an issue the defendant lost in an earlier case, but the United States stands outside that approval. In United States v. Mendoza, the Supreme Court said so in terms: “Parklane Hosiery’s approval of nonmutual offensive collateral estoppel is not to be extended to the United States.”² What the stranger would ask for is not an end to the later suit, since issue preclusion compels the court only to make the same finding the first court made on the identical issue.³ Against the government, the court refuses even that. The common error is to run the Parklane fairness factors, find the first suit fair to the government, and grant estoppel; the identity of the defendant ends the analysis before the factors begin.

The exclusion is narrow. When the same two parties meet twice, ordinary issue preclusion applies to the government as it does to anyone, so a taxpayer and the United States who litigate an issue in one suit are both held to the result in the next.⁴ Only the stranger's offensive use is closed off: if A sues the United States and prevails, B may not in a later suit use against the United States the issues determined in A's favor.⁵

The two taxpayers differ in a single fact, whether each took part in the first case, and that fact decides the result. Abandoning mutuality changed who may invoke a judgment; the exclusion withdraws that change for one defendant and leaves the rest of preclusion law untouched.

Two concerns support the exclusion. The first is how the government chooses its appeals. At present the United States appeals selectively, taking only cases in which some principle of law or fact important to it is at stake, and the office of the Solicitor General makes these discretionary judgments.⁶ The Mendoza Court worried that applying Parklane to the United States would force the government to appeal virtually every case it lost, for fear of the effect on later cases.⁷ The asymmetry explains the fear: a stranger could borrow the government's loss, while the government's win would bind no stranger.

The second concern is constitutional. Ordinarily a single district court ruling does not bind other courts. Issue preclusion would change that, because one district court decision against the government on a constitutional issue would become super-precedent that binds all other courts, including the Supreme Court.⁸ Suppose a district court, in the course of a criminal trial, ruled that all warrantless searches of automobiles are unconstitutional. If that ruling stood, every later defendant could apply it against the United States, and unlike ordinary precedent it would not be open to reconsideration or overruling by the Supreme Court.⁹

Neither concern is unique to the United States, and a good answer says so. State governments, Microsoft, General Motors, and large insurers also choose their appeals with later suits in mind, yet no comparable exception has been carved out for them.¹⁰ The constitutional concern is the stronger of the two, and it raises a question the doctrine leaves open: whether a narrower exception, confined to questions of constitutional law, would serve as well as a blanket exclusion.¹¹

Agency and Arbitral Decisions

The federal statute on state judgments, 28 U.S.C. § 1738, gives the records and judicial proceedings of a state's courts the same full faith and credit in every court that they have in the courts of that state.¹³ Its words are about courts and legislatures. A hearing officer's ruling on unemployment benefits and an arbitrator's award fit neither description, so the statute does not itself say how much a later court must respect them. The answer comes from the idea that has organized this part of the chapter: a finding should bind only when the process that produced it was a fair substitute for the hearing the bound party would otherwise have received. Decisions of agencies and arbitral tribunals can foreclose later litigation through claim preclusion or issue preclusion, and the general principles of former adjudication apply to them, though the analysis differs from setting to setting.¹⁴ Refusing these decisions any effect would waste factfinding the parties have already paid for. Giving every one of them full effect would bind parties to results reached through processes that differ widely in procedure, in the incentive to contest, and in statutory purpose.

Agency decisions arise in four settings, sorted by which decision-maker comes first and which comes second:

• successive proceedings before the same agency;
• successive proceedings before different agencies;
• an earlier court decision followed by a later agency proceeding;
• an earlier agency decision followed by a later court proceeding.¹⁵

When the same agency decides the same question twice, courts apply the traditional rules of preclusion but remain willing to let the agency avoid them in order to serve the policies of the statute that creates and governs it.¹⁶ In Hicks v. Commissioner of Social Security, the Sixth Circuit held that claimants' eligibility for benefits was not subject to preclusion, even though the Social Security Administration had earlier determined administratively that they were eligible.¹⁷ The agency answers to its statute, and a rigid rule that locked it into every earlier ruling could pull it away from what the statute requires. When a second, different agency is involved, the first agency's decision is less likely to bind it.¹⁸ Each agency has its own statute, so a finding made to advance one program may rest on purposes and procedures that do not fit another.

The sequence runs the other way when a court judgment comes first. An agency proceeding that follows a judicial determination ordinarily must recognize the preclusive effect of the court's judgment on the issues the two proceedings share, because a contrary rule would let a party mount a direct attack on an unfavorable judgment inside an administrative proceeding.¹⁹ The agency's duty stops where a later court's would stop: it need not give preclusive effect to a court's determination in situations where a subsequent court would not be required to do so.²⁰

An earlier agency decision followed by a later court proceeding produces the most familiar disputes, and discharge litigation supplies the standard example. If a worker was disqualified from unemployment benefits because he or she was fired for misconduct, the employer will often try to bar the worker from relitigating the reason for the discharge, or whether there was just cause, in a later common law suit.²¹ The use can run the other way as well: a worker who receives a favorable ruling on the reason for the discharge or the justification for a quit may try to hold the employer to it in a later wrongful-discharge action.²²

The doctrine at work in these cases is issue preclusion. A benefits proceeding decides eligibility for benefits, not whether the employer wrongfully discharged the worker, so the later suit is a different claim, and the argument concerns the issue of why the worker left. That distinction matters because issue preclusion does not end the later suit; it compels the court to make the same finding the agency made on the identical issue.²³ The ordinary elements govern, beginning with the first: the issue at stake must be identical to one actually litigated and necessarily adjudicated in the earlier proceeding.²⁴ The remaining elements from earlier in the chapter, including a party or privy bound by a final decision and a full and fair opportunity to litigate, apply as well.

An agency finding must also come from a particular kind of process. Most jurisdictions give preclusive effect to administrative determinations if the procedures are adjudicatory in nature, a method of appeal exists, and the legislature clearly intended the determination to be final in the absence of an appeal, although not every state has adopted that rule.²⁵ Each condition answers a separate weakness. An adjudicatory procedure, in which the parties present evidence and a decision-maker resolves disputed facts, is the substitute for a trial that preclusion presupposes. A method of appeal matters because appeal is how a mistaken finding gets corrected. The legislative-intent condition recognizes that the legislature that created the program decides what its decisions are for, so a ruling meant only as a step in paying or denying benefits was not designed to settle questions in other suits. The appeal condition has a limit worth remembering: a party who won the first case ordinarily cannot appeal an adverse finding, because the error is harmless and the appellate court would dismiss the appeal.²⁶

Agency procedures seldom match a court's exactly, and the test allows for that. Many modern agencies are quasi-adjudicative, meaning they use court-like procedures, and the Supreme Court has long approved giving issue-preclusive effect to appropriate administrative findings, as in University of Tennessee v. Elliott.²⁷ The burden of proof also carries over from earlier in the chapter. If the burden differs between the first and second proceedings, there is no assurance the result would be the same in both, so the issues may not be identical.²⁸ That is why an acquittal in a criminal case does not affect a parallel civil case.²⁹ An agency finding made by a preponderance of the evidence therefore does not establish a fact that the later proceeding must prove by a higher standard.

A worker denied unemployment benefits for misconduct after an adjudicatory hearing that could be appealed is in the position the rule describes, so the employer in the later wrongful-discharge suit can use the misconduct finding to hold the worker to the reason for the discharge.³⁰ A ruling from a proceeding that lacked those features, such as one with no route of review or one the legislature did not mean to be final, gives the employer nothing to use, and the court tries the reason for the discharge as though the benefits case had never occurred. The same conditions test the finding when the worker is the one invoking it, because the question is whether the process was fit to bind, and that does not change with the identity of the party relying on the result. A worker who defended a small benefits claim against a much larger damages suit can also raise the incentive concern from earlier in the chapter, which the court weighs along with the agency's procedures.

Arbitration follows a different pattern. Claim preclusion from an arbitration is the more dependable doctrine, and proving that an earlier arbitration resolved an issue tends to be harder than proving that either an arbitration or a litigation resolved a claim.³¹ Issue preclusion can apply when the earlier case was an arbitration, but it is a matter of judicial discretion and so is less reliable than issue preclusion from litigation.³² A party who must show that an earlier arbitration resolved an issue therefore carries a heavier task than one who shows that an earlier lawsuit did.

Ann arbitrates a claim against Bob, and the arbitrator rules that certain conduct by Bob was negligent. Carlos, who took no part in the arbitration, then sues Bob for damages arising from the same conduct. Under nonmutual issue preclusion, the court hearing Carlos's case may hold that Carlos need not reprove Bob's negligence, adopt the arbitrator's ruling, and move on to causation and damages, treating the ruling as it would treat a court ruling against Bob.³³ The word may marks the court's discretion, so neither side can count on the result.

Because the decision is discretionary, the court can weigh the same concerns that governed the earlier sections, including whether the arbitration gave the party against whom the finding is offered a full and fair opportunity. An award that states no reasons also revives the actually-decided problem. When a judgment may rest on different findings on more than one issue, the majority view gives no preclusive effect to any issue unless evidence shows which issues were actually litigated and decided, while the minority view treats all issues as actually litigated.³⁴ An unreasoned award raises the same difficulty, because the later court cannot easily tell which issues the arbitrator resolved.