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What are the Elements of Collateral Estoppel (Issue Preclusion)?

December 16, 2020

A party to a lawsuit might receive only one chance to assert a claim or raise a defense. Once a court has made a final judgment on a particular issue, the doctrine of collateral estoppel, or “issue preclusion,” states that the issue cannot be raised again. The effect of this doctrine is not necessarily limited to the parties involved in the lawsuit that resulted in the final judgment.

Collateral estoppel is closely related to the doctrine of res judicata, also known as “claim preclusion,” which prevents a party from asserting a claim or cause of action after it is subject to a final judgment. While res judicata deals with questions of law, collateral estoppel can apply to issues of law or fact. A litigant must carefully plan and prepare the claims or defenses that they will assert in a lawsuit to avoid missing something important, and then losing the opportunity to assert it at a later date.

What is Collateral Estoppel?

Collateral estoppel is more difficult to define than res judicata, although its definition appears simple on the surface. It prohibits the re-litigation of a factual or legal issue after a court has issued a final ruling on that issue. This may apply across jurisdictions, including between different states and between state and federal courts.

A defendant can raise collateral estoppel as a defense in a new lawsuit, when the plaintiff previously obtained a ruling on the same issue. This often applies when the defendant was also involved in the prior lawsuit, but a new defendant might be able to assert collateral estoppel as well.

A plaintiff can also make offensive use of collateral estoppel against a defendant who is the subject of a previous ruling. Collateral estoppel can allow a plaintiff to enforce a prior judgment against a defendant on a particular issue. The US Supreme Court has stated that courts have discretion about whether to allow the offensive use of collateral estoppel. Factors for courts to consider include whether the plaintiff could have intervened in the earlier lawsuit, and whether applying collateral estoppel would be unfair to the defendant. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 330-32 (1979).

Elements of Collateral Estoppel

Unlike many legal doctrines, collateral estoppel does not have a set of discrete elements established by the Supreme Court or a lower court. The specific requirements for collateral estoppel will vary from one jurisdiction to the next, but they all have several features in common.

Valid Final Judgment

A court must have rendered a valid final judgment on a particular legal or factual issue for collateral estoppel to apply. “Valid” does not, however, mean free from error. One of the purposes of the collateral estoppel doctrine is to prevent litigants from using trial courts, rather than appellate courts, to attempt to correct adverse rulings. The Supreme Court has held that “a judgment merely voidable because based upon an erroneous view of the law is not open to collateral attack.” Baltimore SS Co. v. Phillips, 274 US 316, 325 (1927).

Personal and Subject Matter Jurisdiction

The original court must have had subject matter jurisdiction over an issue for the judgment to be valid, and for collateral estoppel to apply to that issue. The court must also have had personal jurisdiction over anyone who might be prevented from re-litigating that issue in the future. Unlike res judicata, collateral estoppel does not necessarily require mutuality of parties, meaning that it could affect people or entities that were not part of the original lawsuit, as long as they are within the original court’s reach.

1942 ruling by the California Supreme Court in Bernhard v. Bank of America demonstrates a situation in which collateral estoppel might block an issue in a new lawsuit with a different party. In a lawsuit between the beneficiary of an estate and the estate executor, the court ruled that certain property belonged to the executor, and it was not an asset of the estate. The beneficiary then filed suit against the bank that held the asset in question, again claiming that it was part of the estate. The court held that collateral estoppel prohibited the beneficiary from raising this issue a second time, since it had been resolved in the executor’s favor in the earlier lawsuit.

The issue of personal jurisdiction relates to the questions of fairness identified by the Supreme Court in Parklane Hosiery. While this is not the only factor for courts to consider, collateral estoppel could apply to persons who were not part of the original lawsuit, as long as it is at least hypothetically possible that they could have been involved in it.

The Same Issue of Law or Fact

Determining whether an issue has already been addressed by a valid final judgment can sometimes be straightforward. The California estate law case mentioned earlier, for example, presented a straightforward issue: how to characterize the ownership of a particular item of property. Determining whether an issue in a new lawsuit is the same as an issue in a prior lawsuit can also be profoundly complicated.

A California appellate court ruled in 1998 that an issue of fact is not subject to collateral estoppel when the new claim carries a different burden of proof from the earlier claim. The underlying factual questions were the same, but while the earlier case required proof beyond a reasonable doubt, the later case only required proof by a preponderance of evidence.

The US Supreme Court has ruled that collateral estoppel may preclude a later claim involving the same set of facts but a different statute. In B & B Hardware v. Hargis Industries, 575 U.S. ___ (2015), the court held that a later claim under a different section of federal trademark law was precluded by an earlier ruling, since both of the statutes involved the alleged use of a mark in a way that is “likely to cause confusion.”