Civil Procedure Class Notes 12/5/03


Yesterday, we continued to look at preclusion from the standpoint of claim preclusion.  We’ll finish claim preclusion today.


Say the city of Vandalia has a nuisance statute and they want to sue Frier for the nuisance of parking his cars in the alleyway.  Frier answers the suit denying all the allegations.  Even though the lawsuit is filed, there is a consent degree.  That’s basically a judicially-enforced settlement between the parties.  One reason you might prefer such a decree over a settlement is that it’s a judicial order.  If you violate it, you’ll go back to the same court and the same judge to enforce the order.  A plain vanilla settlement is simply a contract.  If it’s breached, you’ll have to sue and that suit may go anywhere.


Later, Frier decides that he wants to sue the city for his § 1983 claim.  Can he do that?  No…but why?  What rule tells us so?  One thing that the Federal Rules do is they have elements of preclusion embedded in them.  Rule 13(a), which is the compulsory counterclaim rule, says you have to state all your counterclaims during the first suit: you gotta use ‘em or lose ‘em.  The second suit would be barred, but not under the common law rules of preclusion.  Rather, this Federal Rule would bar the claim.  This rule, in turn, is anchored in a transactional test of claim preclusion.


This is a variation of…


Martino v. McDonald’s System, Inc.


What’s going on?  Who owns what?  Somebody owns a McDonald’s.  Martino does.  He has a franchise.  What gets him into this litigation in the first place?  When they got the franchise, they agreed not to compete by taking an interest in another fast food franchise.  Martino doesn’t take an interest in another franchise, but his son does buy a Burger Chef.  McDonald’s says: You can’t do that!  You’re violating our franchise agreement.


McDonald’s sues Martino on the franchise agreement, which is a breach of contract claim.  What happens to that suit?  They settle it and they have the court put in a consent judgment.  Martino sells the franchise back to McDonald’s.


What’s the second lawsuit that comes a couple of years later?  Martino sues McDonald’s in antitrust, saying: You can’t stop us from owning multiple burger places!  That’s not fair under Sherman!  But is the antitrust action precluded?  The trial court says yes under Rule 13(a), but the appellate court says they messed up a little.  Martino never made any pleadings in the first lawsuit!  He thus can’t be precluded on that basis.  Rule 7(a) tells us that a pleading is a “complaint, answer, reply”…all that stuff.


The first lawsuit settled by consent decree.  But when?  When in the procedure?  Had Martino answered the first lawsuit?  Had Martino answered, his antitrust claim would have been a compulsive counterclaim in the answer.  But since he never filed a pleading, technically the counterclaim rule can’t apply.  We can’t force him to do something he hasn’t had to do yet.


If Martino had answered, and then we got the consent decree, the answer would have been easy.  Rule 13(a) would correctly prohibit the second lawsuit because the antitrust claim would have been a compulsory counterclaim coming out of the same “transaction or occurrence”.  To avoid this result, Martino should have filed his counterclaim at the time of his answer.  This is all part of the efficiency mechanism of the Federal Rules.  It’s a “use ‘em or lose ‘em” philosophy.


This doesn’t help in this case, and so the court falls back on the common law compulsory counterclaim.  What the heck is that?  It’s some bastardized version of claim preclusion AKA res judicata.  Sort out the terminology is difficult and troubling!  The idea of a common law compulsory counterclaim is bizarre.  What they’re saying is that there are common law rules that append onto the Federal Rules of Civil Procedure that you have to follow as well.


What is the court trying to say?  The court says that a judgment on the merits is an absolute bar to relitigation.  Is the consent decree a judgment on the merits?  It’s a settlement.  Is that a decision on the merits?  A settlement wouldn’t be, but a court-ordered consent decree is a judgment on the merits.  We’ve cleared that threshold, but there’s another requirement.  A cause of action includes your defenses.


What if you have both a defense and a counterclaim?  The law says that if you have both, it precludes the defense but doesn’t preclude you from relying on those facts later on.


The court says you can’t nullify rights established by the prior action.


Yeazell says that this is a load of crap.  His explanation isn’t much better, according to Fairman.  Yeazell says that this ruling protects the consistency of judgments.


Searle Brothers v. Searle


First, there was a divorce.  Edlean sued Woodey for divorce.


They’ve got marital property.  Edlean gets Slaugh house in the divorce suit.


The sons get mad and they bring their suit!  They sue their own mother.  They sue for their interest in Slaugh house.


What’s the issue?  Is this suit precluded?  Usually, we’d say obviously not.  If Frier can bring his suit yet Frier’s wife’s suit is protected, then it seems that the sons’ suit isn’t precluded…but for the doctrine of the sons’ privity.


Is this issue preclusion or is it claim preclusion?  What’s the claim in the first suit?  It’s a suit for divorce.  What’s the second lawsuit for?  It’s for the property.  The property is an element of the divorce action because the court has to figure out what to do with it.


There are issue preclusive things that may have come out of the first lawsuit, but for the privity issue, we should look at this as a claim preclusion issue.  The court gets it all confused, though!


The sons were not parties to the divorce suit.  In fact, could they have been parties to the divorce suit?  No!  This doctrine says we’ll bar certain people from filing more lawsuits even though they weren’t actually parties to the previous suit.


We’re left with this privity idea.  Basically, privity is the idea of a relationship between parties such that there is an identity of legal interests: like property owners and successive owners are in privity with one another.  Trustees and beneficiaries can stand in the same relationship, as well as executors and heirs.  The executor acts on the behalf of the heirs; trustees act on behalf of the beneficiaries.  Thus, there is an identity of legal interests.


The court says that there must be a strong legal relationship to bind someone to somebody’s else’s judgment.  The majority finds that the second suit isn’t barred because they’re not in privity.  So what happens to poor Edlean?  She won the previous suit, but she could lose her property interest now!


As a matter of lawyering, what should her lawyer have done when you knew this dispute was percolating in the background?  You want to file a suit to “quiet title”.  You get everyone who has claim to a property in one place and hash it out.  Do that first, and then that will have an issue preclusive effect on the subsequent divorce suit.


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