I'm back to posting Civ Pro exam questions with answers, although at a slower place than before. All of the posted questions are available in the Old Civil Procedure Exams category (to the right on this blog).
Essay Question 1.
E (an employee of the P Corp.), D and X are in a three-car accident in northern Alabama. The P Corp. (which is incorporated in Alabama) sues D, a citizen of Georgia, under Alabama negligence law for the $100,000 in damages that, it claims, D’s negligence caused its truck and contents. The P Corp.’s suit against D is in the Federal District Court for the Northern District of Georgia. D makes a motion to dismiss for lack of subject matter jurisdiction, on the ground that the P Corp.’s principal place of business is Georgia. Evidence is submitted by each side and the federal court in Georgia finds that the P Corp. does indeed have its principal place of business in Georgia. The court dismisses the case. A few days after the dismissal, the P Corp. brings suit against X (also a Georgia citizen), under Alabama negligence law, in the Federal District Court for the Northern District of Alabama. The P Corp.’s suit is for the $100,000 in damages that, it claims, X’s negligence caused its truck and contents. X makes a motion to dismiss for lack of subject matter jurisdiction on the grounds that the P Corp.’s principal place of business is Georgia. Furthermore, X argues, the P Corp. is issue precluded from relitigating its principal place of business because of the earlier litigation of that issue in Georgia. The P Corp. denies that its principal place of business is Georgia and denies that it can be precluded by X from relitigating this issue. Under Alabama law, non-mutual issue preclusion is allowed. Under Georgia law, however, issue preclusion requires mutuality. Is the P Corp. issue precluded from relitigating its principal place of business or not? Why? [30 points]
This was an Erie question and it was very very hard. Whether you did well on this question has everything to do with whether you recognized that it was an Erie question. There are three possible bodies of law on issue preclusion that you needed to consider. Alabama law, Georgia law, and federal law. I did not mention whether federal law on issue preclusion requires mutuality, because you already know, or should know, that it does not. See, e.g., Parklane Hosiery.
Here is the problem: The P Corp. has already litigated the issue of its principal place of business in the suit in federal court in Georgia. Is it precluded from relitigating the same issue in the suit in federal court in Alabama? Some of you may have wondered whether issue preclusion applies to jurisdictional questions at all. But we have already seen in class that it does. Assume A sues B, B appears and litigates the issue of subject matter or personal jurisdiction and loses, and then also loses on the merits. When A brings a second suit on the judgment, B is issue precluded from relitigating the question of whether the earlier court had jurisdiction. So we know that issue preclusion applies to questions of jurisdiction.
But in this case the person taking advantage of issue preclusion was not a party to the earlier suit. (This is, incidentally, a case of defensive non-mutual issue preclusion. The person taking advantage of issue preclusion is a defendant, using it as a shield.) Therefore it makes a world of difference whether the applicable law on issue preclusion requires mutuality or not. Alabama and federal law do not. Georgia law does.
The relevance of Alabama law can be dismissed quickly. As we have noted many times in class, the relevant preclusion law is the law of the court where the precluding judgment was entered, not the law of the court where the doctrine of issue preclusion is being invoked. So there is no chance that Alabama law is relevant. We must instead look to the law of the court where the issue precluding judgment was entered.
But since this court was a federal court sitting in diversity, we have two laws to choose from: Georgia law and federal law. This is our Erie question. Which applies? In the Semtek case, it was decided that state law determines the question of whether a dismissal on statute of limitations grounds has claim preclusive effect. So the quick answer is simply to say that Semtek applies to issue preclusion as well and thus that Georgia law applies. That would mean that the P Corp. may relitigate this issue of its principal place of business.
But this is too quick. You will remember from class that I argued that even with respect to other aspects of claim preclusion law (such as the question of the scope of a claim), Erie analysis may suggest that federal rather than state law is applicable. Semtek may be limited. So you have to do the Erie analysis.
This is, of course, a question of choosing between state procedural law and federal procedural common law. So the "relatively unguided" (Hanna) Erie analysis is applied.
The first question under this analysis is whether having different mutuality requirements in state and federal courts will lead to forum shopping and the inequitable administration of the laws. Crucial to answering this question is determining whether we are talking about differences in mutuality requirements concerning the issue preclusive effect of all factual determinations or merely concerning the factual determinations of whether federal subject matter jurisdiction exists. If we are talking only about the latter there are probably no forum shopping worries. After all, the state court will not even make a determination of whether there is federal subject matter jurisdiction. So it is not as if the differences in the preclusive effect of the determination of that issue would make a difference to plaintiffs when choosing a forum to sue in (or to defendants when deciding whether to remove or not). The issue simply will not be determined in state court at all. To be sure, someone who is worried about the issue-preclusive effect of determinations of federal subject matter jurisdiction may choose state over federal court. But the reason will primarily be because the federal court will decide this issue while the state court will not. This problem of "forum shopping" will exist to some extent no matter what answer to the Erie question one comes to, even if one concludes that the Georgia mutuality rule applies. The forum shopping problem is primarily a result of the fact that federal courts (unlike state courts) must decide the question of whether there is subject matter jurisdiction. So it does not seem to make that much of an extra difference to forum shopping that federal law will determine the preclusive effect of that determination of federal subject matter jurisdiction. Similar arguments apply to the question of "inequitable administration of the laws."
On the other hand, let's say that we are determining the mutuality requirement with respect to the issue preclusive effect of all factual determinations. Then the story is quite different. In particular a defendant may not want to remove to federal court (choosing instead to remain in state court) in order to keep the adverse determinations of issues from having preclusive effect that could be taken advantage of by non-parties. Say a company is being sued in state court in Georgia for negligently designing a product. It would not want to remove to federal court (even if it was its right to do so), because, if federal law of issue precusion applies in federal court in diversity cases, any finding that the product was negligently designed might be taken advantage of by countless other potential plaintiffs. Since the costs of litigating in federal vs. Georgia state courts would be so different, there would be a great deal of forum shopping.
The question of whether there are countervailing federal interests in uniformity also has to do with whether the question is 1) mutuality concerning the preclusive effect of determinations of federal subject matter jurisdiction or 2) mutuality concerning the preclusive effect of determinations of any factual issue. Federal courts clearly have an interest in a uniform body of law concerning when the determination federal subject matter jurisdiction by one federal court will have issue preclusive effect in another federal court.
On the other hand, if the question is the mutuality requirement for issue preclusion as a whole, the arguments for federal uniformity may be less strong.
How you came out on this matters less than going through the proper Erie analysis.
Many of you argued that Alabama issue preclusion law should be used by the federal court in Alabama, citing Klaxon (according to which federal courts use the choice-of-law rules of the state where the federal court is sitting). This was a sign of confusion.
First of all, simply because the federal court in Alabama must use Alabama's choice of law rules does NOT mean that Alabama issue preclusion law applies. The question is whether an Alabama state court, when confronted with the determination of an issue in another jurisdiction, would use the issue preclusion law of that other jurisdiction or its own issue preclusion law. And we already know the answer -- as I have said above, it must use the issue preclusion law of the court where the issue-precluding judgment was entered, NOT the law of the court where issue preclusion is being invoked.