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Agenda for 19th Class (AE)• Admin

– Name plates– Handouts

• Slides• Mock mediation results• SJ in A Civil Action re Statute of Limitations and Erie

– Wednesday Nov 5 -- Make-up class 6-8PM in Rm 3 – Friday, Nov 7 -- Class canceled

• Review of Fees• Erie doctrine• Choice of Law• Introduction to Res Judicata & Collateral Estoppel

Assignment for Next Class• Res Judicata

– US Constitution Article IV (Supplement p. 1)– 28 USC 1738– Yeazell pp. 715-27– Questions to think about / Writing Assignment

• Briefly Summarize Frier• Yeazell p. 727 Q1

– Optional: Glannon Chapters 26 & 27• Collateral Estoppel

– Yeazell 749-67– Questions to think about / Writing Assignment

• Yeazell p. 750 Qs 1-3• Yeazell p. 753 Q 2 • Yeazell p. 756 Qs 1-4• Briefly summarize Parklane• Yeazell pp. 764ff Qs 1c, 2a&b, 5a&b

– Optional. Glannon Chapters 28 and 292

Mock Mediations• See sheet for settlements & final offers• Questions, comments, or suggestions?

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Review of Fee Shifting• Advantages of British Rule

– Allows plaintiffs to bring meritorious (high probability) cases, even when litigation costs are high. See Example 11.

– Discourages plaintiffs from bringing frivolous (low probability) suits. See Examples 15.

• Disadvantages of English Rule– Public interest litigation to change the law may be deterred,

because it has a low probability of succeeding, even though it is not “frivolous.”

– Risk averse plaintiffs may not bring even meritorious suits. Example 14.

– Because of the way the English Rule magnifies optimism, it may discourage settlement. See Example 16.

• Although risk averse parties may be more likely to settle under British rule

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Erie Doctrine I• Swift v. Tyson (1841)(Story). Federal courts apply state statutes in diversity

cases, but do not need to follow state court decisions on common law. State court decisions are only “evidence” of “general principles of commercial law,” and federal courts are free to develop common law as they see fit

• Erie RR v. Tompkins (1938) (Brandeis)– RR accident. Issue is whether to apply PA court decisions, defendant

may be liable only for “williful or wanton injury” (not mere negligence)– Rejects Swift v Tyson. Federal courts apply common law as interpreted

by state courts• Usually that means as interpreted by state court in state in which

federal court is located, but see next class on choice of law.– Swift gives out-of-state citizens unfair advantage, because they can

choose either state law (by suing in state court) or federal law (by suing in federal court)

– Congress does not have the power to make commercial law. Nor do the federal courts. (probably wrong now)

– Swift makes jurisprudential mistake of assuming that there is a “transcendental body of law outside of any particular State”

• Influence of legal realism

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Erie Doctrine II• Guaranty Trust v. York (1945)(Frankfurter) (not assigned)

– Federal court must apply state statute of limitations, which was shorter, because statutes of limitations are “outcome determinative”

– Law is not “brooding omnipresence of Reason”– Don’t draw (formalistic) line between substance and

procedure– Instead, ensure that “outcome of litigation in the federal court

[is] substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in State court.”

– State statutes should be disregarded only if they concern “merely the manner and means by which a right to recover is … enforced.”

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Erie Doctrine III• Hanna v. Plumer (1965)

– FRCP 4 applies in federal court rather than narrower state statute– FRCP are authorized by federal statute, Rules Enabling Act, and apply

in federal court, regardless of contrary state court rule, • as long as rule is constitutional and governs the “practice and

procedure of the district courts,” and is thus authorized by the statute– Every rule or practice is potentially “outcome determinative”– For federal practices

• Consider policies behind Erie– Discourage forum shopping– Avoid “inequitable administration of justice”

• What is “federal practice”?– Procedure not in FRCP or federal statutes– Example: standards of review

• Modern trend. Apply federal rules and practices in federal court

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Erie Questions• Suppose West Dakota has a summary judgment practice different from the that

which has governed in the federal courts since Celotex. In West Dakota, a defendant may not prevail by pointing out that plaintiff lacks evidence on an issue, but rather the defendant can only prevail on summary judgment by presenting undisputed evidence on every issue. If a diversity case is filed in federal district court in West Dakota, what standard should apply if the defendant files a motion for summary judgment?

• Federal courts have a policy of encouraging mediation. One aspect of that policy is that neither the parties nor the mediator can be compelled to reveal what was said in mediation. In addition, a mediator’s proposal is immune from disclosure. That is, if, at the end of the mediation, the mediator suggests what she thinks is a fair settlement, those settlement terms are confidential and cannot be revealed to a judge or jury. The federal policy is not embodied in the Federal Rules of Civil Procedure or Federal Rules of Evidence, but is part of case law at the appellate level in most circuits, including the Fourteenth Circuit, which includes East Dakota. East Dakota state courts have no such policy. Judges are free to ask questions of lawyers about mediation. Some find it useful to ask, “what was the mediator’s proposal?” Judges use that information in a variety of ways. Some use it as the starting point for their own settlement conferences; they encourage the parties to agree to the mediator’s proposal or something similar. Some take a more aggressive approach and implicitly threaten lawyers, “if you don’t accept the mediator’s proposal, I’ll make sure evidentiary and other rulings go against you.” Judge Fred, a federal district court judge in East Dakota, thinks that the East Dakota state court’s approach is the correct one, because mediation is so useful that no one in her right mind would refuse mediation because she feared disclosure of the mediator’s proposal. Patty sued David for breach of contract in federal court in East Dakota. The parties went through an unsuccessful mediation. May Judge Fred compel Patty and David to reveal the mediator’s proposal? (from 2011 exam)

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Choice of Law Questions I• 1) Suppose Wes, a resident of West Dakota, gets into an

accident with East, a resident of East Dakota, on a highway in West Dakota. Wes sues East in West Dakota state court alleging per se negligence because East was driving 79 miles per hour. No speed limit was posted. West Dakota law states that, unless otherwise posted, the speed limit on a highway is 70 miles per hour. East Dakota law, however, states that, unless otherwise posted, the speed limit on a highway is 80 miles per hour. Which state’s law applies to this dispute? Is your answer different under the traditional lex loci commissi rule than under the Restatement Second? If your answer is different, which rule makes more sense?

• 2) Same as (1) except Wes sues in West Dakota federal district court.

• 3) Same as (1) except Wes sues in East Dakota state court.

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Choice of Law Questions II• 4) Driver and Passenger both reside in West Dakota. Driver

drives passenger to East Dakota. While in East Dakota, Driver talks on his cell phone and causes an accident in which Passenger is injured. Passenger sues Driver in West Dakota state court for negligence. According to East Dakota law, passengers have no right to sue drivers for injuries caused by negligence. According to West Dakota law, passengers can sue drivers for negligence. Which state’s law applies to this dispute? Is your answer different under the traditional lex loci commissi rule than under the Restatement Second? If your answer is different, which rule makes more sense?

• 5) Same as (4), except Passenger sues in West Dakota federal court.

• 6) Same as (4) except Passenger sues in East Dakota state court.

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Choice of Law Questions III• 7) Spend, a Nevada domiciliary, is completely irresponsible with money.

Fortunately, he recognizes this fact and has set up a spendthrift trust. Under the terms of the trust, Spend cannot borrow money without the consent of Trustee, a friend he trusts. Spend goes to California and borrows money there from Sharkey to be repaid in one year at Sharkey’s place of business in California. When Spend doesn’t repay the loan, Sharkey sues Spend in Nevada. Under Nevada law, loans to someone who has set up a spendthrift trust are void. California law does not allow people to set up spendthrift trusts, so under California law, such loans are enforceable. The traditional rule for contracts was the law of the place the contract was formed governs disputes about contract validity. Under the traditional rule, what state’s law would apply? Under the Restatement Second, which state’s law should apply to the dispute? If the traditional rule and Restatement Second suggest different answers, which makes more sense?

• 8) Same as (7), except Sharkey sues in California state court.• 9) Same as (8), except Sharkey traveled to Nevada, loaned Spend the

money there, with repayment to be made to Sharkey when he returns to Nevada a year later.

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Choice of Law Questions IV• 10) Same as (7), except the loan contract includes the following clause:

“This contract shall be governed by California law.” The traditional rule was not to enforce choice of law clauses. See also Restatement (Second) below

• § 187. Law Of The State Chosen By The Parties• (1) The law of the state chosen by the parties to govern their contractual

rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.

• (2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either– (a) the chosen state has no substantial relationship to the parties or the

transaction and there is no other reasonable basis for the parties' choice, or

– (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.

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Choice of Law Questions V• Plaintiff in Phillips brought the case in federal district court in Montana. Why

is there a decision of the Supreme Court of Montana?• In Phillips, the Montana Supreme Court observes that “applying the law of

the place of manufacture would be unfair because it would tend to leave victims under compensated as states wishing to attract and hold manufacturing companies would raise the threshold of liability and reduce compensation…. [A state with a high concentration of manufacturing] could enjoy all the benefits associated with liability laws which favored manufacturers in order to attract and retain manufacturing firms and encourage business within its borders while placing the costs of its legislative decision, in the form of less tort compensation, on the shoulders of nonresidents injured by its manufacturers’ products.” (p. 249).– Suppose Montana has a relatively low concentration of manufacturing.

Would its citizens benefit by laws which raised the threshold of liability and reduced compensation? Or would its citizens benefit by laws which lowered the threshold of liability and increased compensation? If it lowered the threshold of liability and increased compensation, who would bear the increase in costs? What does this suggest about the fairness of applying Montana law?

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Choice of Law Questions VI• In Phillips, the Montana Supreme Court asserted that “we do not believe that

the purpose of any potentially applicable Michigan product liability law would be to regulate the design and manufacture of products within its borders. The purpose of product liability law is to regulate interstate sales or sales to residents and to set the level of compensation when residents are injured. ” (p. 249)– If the plaintiffs in Phillips had filed the case in Michigan state court, do

you think Michigan state judges would have agreed that its laws are inapplicable? What purpose might a Michigan judge ascribe to product liability law to show that Michigan law should apply?

• If you were a judge on the Montana Supreme Court, would you have retained the traditional lex loci commissi rule, or would you have voted (like the actual Montana Supreme Court) to adopt the Restatement (Second) most significant relationship approach? Why?

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Introduction to Former Adjudication• 2 concepts

– Res judicata / claim preclusion– Collateral estoppel / issue preclusion

• Res judicata– Cannot litigate same claim several times

• Finality– If two claims are closely related to each other (e.g. same transaction or

occurrence)• Then must bring them together. Compulsory joinder• If litigate one claim and then try to litigate the other

– Second claim will be barred by res judicata• Collateral estoppel

– If issue resolved in one case, cannot relitigate that issue in subsequent case– Suppose long-term contacts

• Litigation I. breach in 1990. Court: contract is valid• Litigation II. Breach in 2000. cannot relitigate contact validity

– Key issue is “non-mutual” collateral estoppel• Case I. A sues B for patent infringement. Court: patent invalid• Case II. A sues C for patent infringement. Can relitigate validity?

– No estoppel if person against whom estoppel asserted was not a party in first case

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Res Judicata• Sometimes one adjudication bars later adjudication

– If plaintiff tries to bring second suit, then defendant has valid affirmative defense

• Policies– Save costs– Prevent inconsistent judgments– Encourage consolidated litigation of related claims

• Also called “claim preclusion”• Easily applies when same plaintiff brings exactly same claim against same

defendant for which previously had lost (or won) after trial and appeal– But res judicata is not so limited

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4 Requirements for Res Judicata• Same claim

– Federal court. Claim arising out of the same transaction or occurrence• Even if claim in second suit not actually raised or litigated in first suit

– Some state courts may apply narrower rules• E.g. claim in second suit arises out of “same evidence”

• Judgment on the Merits– Trial, summary judgment, default judgment– 12(b)(6), but not equivalent dismissals in some states courts– NOT dismissal for lack of jurisdiction or venue

• Final judgment– Judgment entered on all claims– In federal court, still final if appeal pending; not in some state courts

• Same parties– Except judgment against former real property owner bars subsequent

owner– Perhaps other exceptions when interests of parties are very closely

aligned• But exception narrowed by Taylor v. Sturgell

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Collateral Estoppel Requirements• 1. Same issue• 2. Actually litigated. No C.E. if party admitted issue in first suit• 3. Actually decided. No C.E. if court resolved case without deciding issue

– Can be hard to tell if jury verdict• 4. Necessarily decided / Essential to judgment

– If changing result on issue would not change outcome of case, then no C.E.

– If court decides negligence case by finding duty, but no negligence• No C.E. on duty• CE would not be fair to defendant, because could not have appealed

finding of duty– If court decides contract case by deciding that there was no contract and

that, even if there was a contract, there was no breach• Some courts follow Restatement 2nd

– C.E. applies neither to “no contract” nor to “no breach”» Court may not have thought carefully about» Plaintiff may have thought appeal futile

– Unless issue squarely decided on appeal• Other courts follow 1st Restatement and apply C.E. to both

• Like res judicata, apply collateral estoppel rules of court which rendered first judgment

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Nonmutual Collateral Estoppel I• Traditionally, collateral estoppel applied only when parties were the same in

first and second suit (like res judicata)• Some court allow person not a party to the first suit to assert collateral

estoppel, as long as person against whom c.e. asserted was in the first suit (and 4 other requirements satisfied)– Called nonmutual collateral estoppel

• 2 kinds of nonmutual colleral estoppel– Defensive– Offensive

• Defensive nonmutual collateral estoppel– Plaintiff sues defendant1 for patent infringement– Court decides that patent is invalid– Plaintiff sues defendant2 for patent infringement– Defendant2 can assert collateral estoppel against plaintiff

• Because plaintiff already litigated and lost on issue of patent validity– Now accepted in nearly all jurisdictions– “defensive” means asserted by defendant

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Nonmutual Collateral Estoppel II• Offensive nonmutual collateral estoppel

– Plaintiff1 sues defendant for poisoning water– Court decides that defendant poisoned the water– Plaintiff2 sues defendant for poisoning the water– Defendant may be estopped from arguing that did not poison the water– Very controversial

• If defendant loses one case (1st or 2nd or 99th case), would mean that defendant loses all subsequent related cases

– But if one plaintiff loses case, then later plaintiffs not bound by c.e

• Discourages joinder• Defendant may not have had incentive to litigate hard in first case

– Federal courts have discretion to apply c.e. offensively. Factors:• Has there been inconsistent litigation outcomes?• Did plaintiff strategically wait (not join) so as to take advantage of

offensive non-mutual collateral estoppel• Did defendant have sufficient incentive to litigate issue aggressively

in first case– “Offensive” means by plaintiff