Employer and Employee are domiciled in Ohio. P is domiciled in New York. P and Employee got into a car accident in Ohio, while Employee was acting in the scope of his employment with Employer. P sued Employee for negligence in Ohio state court, but P lost, the jury having found not merely that Employee was negligent, but also that P was contributorily negligent.
Subsequently P sued Employer in federal court in Ohio (under diversity) under a theory of respondeat superior. P alleged that Employee was reckless in the car accident between them. Under Ohio law, contributory negligence is not an affirmative defense to an action for recklessness. Employer argues that P’s action against him should be barred by claim preclusion. Is Employer right?
This question was about claim preclusion, not issue preclusion. There was a cause of action not asserted by P against Employee in the previous litigation (namely recklessness). May it be asserted by P in subsequent litigation against Employer or is P claim precluded from doing so?
First of all, it should be mentioned that the claim preclusion law that would answer this question is Ohio’s. This follows from the second court’s obligations under Full Faith and Credit. In particular, the Full Faith and Credit statute (28 U.S.C. § 1738) is at issue, rather than the Full Faith and Credit Clause (U.S. Const. Art IV, § 1), since the question is the obligation of a federal court to recognize a state court’s judgment, not the obligation of a state court to recognize another state court’s judgment. Under the Full Faith and Credit statute, a federal court must give the judgment of a state court the same effect that it would have in state where the judgment was rendered (with exceptions we didn’t discuss and that are irrelevant here). The court that issued the judgment was a state court in Ohio. So the question is the claim preclusive effect that Ohio state courts would give that earlier Ohio state court judgment – and that is a question of Ohio law.
Notice that this is NOT an Erie/Semtek question. In Semtek the issue was what law one should look to when determining the claim preclusive effect of the judgment of a federal court sitting in diversity (in particular a dismissal on statute of limitations grounds). Is it the federal law of claim preclusion or the law of the state where the federal court is located? But the judgment in this case was not made by a federal court sitting in diversity. It was made by a state court in Ohio. So the relevant claim preclusion law is clearly Ohio state law. True, the second court (the court considering the earlier court’s claim preclusive effect) is a federal court sitting in diversity. But as we have seen the relevant law of is the law of the first court – the court that issued the judgment.
Of course, you don’t know anything about Ohio’s law of claim preclusion. So you had to speculate on the basis of the claim preclusion law that you did know (namely federal law).
The transaction is the same in the two suits and there was a final valid judgment on the merits. The problem is that the parties are not the same. In the first suit Employee was sued by P and in the second Employer was. Nor are the two in privity. To see why this is the case, assume that Employee lost the first suit because Employee was found to have been negligent and P was found to be not contributorily negligent. Assume further that P couldn’t get any money from Employee and so decided to bring a second suit against Employer for Employee’s negligence. If Employee and Employer were in privity, Employer could be issue precluded from relitigating Employee’s negligence. That would be unfair to Employer. Clearly privity does not exist.
So it looks like there should be no claim preclusion. But not so fast. A good deal of you recognized that there is a problem with not allowing nonmutual claim preclusion. Assume that P could sue Employer for Employee’s recklessness. Would Employer have an indemnification action against Employee? If we say yes, then Employee is treated unfairly. The earlier judgment in Employee’s favor was supposed to insulate Employee from all subsequent causes of action concerning that transaction – but now Employee must defend (against Employer) concerning recklessness that allegedly occurred during the accident. If we say there is no indemnification action allowed, then Employer is treated unfairly. The liability of employers for the torts of their employees is predicated on the possibility of the employer to be indemnified by the employee. It would be unfair to hold Employer liable to P, but claim that Employer cannot recover his loses through an indemnification suit against Employee. The solution is to bar P from bringing the recklessness action against Employer in the first place. Non-mutual claim preclusion is commonly allowed in such cases. See, e.g., Citibank, N.A. v. Data Lease Fin. Corp., 904 F.2d 1498, 1502-1503 (11th Cir. 1990) (claim against the person vicariously responsible is barred by a judgment in favor of the person primarily responsible). This is nonmutual claim preclusion, because the action is that is barred is one that was not brought in the earlier action, but is part of the same transaction litigated in the earlier action.
Although the question was about claim preclusion, many of you insisted on talking about issue preclusion anyway. In fact issue preclusion would have been useless to Employer in defending himself against P’s suit. Why? In the second suit, P is suing Employer for Employee’s recklessness. What issues were actually litigated and decided and essential to the judgment in the earlier action between P and Employee? Only P’s contributory negligence. And, as I noted in the question, P’s contributory negligence is not a defense to an action by P for recklessness.
Some of you tried to argue that the finding in the earlier litigation that Employee was negligent could be used by Employer to issue preclude P from litigating Employee’s recklessness. This was wrong for a number of reasons.
First of all, the conclusion that Employee was negligent was not essential to the judgment for Employee in the first suit. The court could have come to the judgment for Employee solely on the basis of the finding that P was contributorily negligent – without the finding the Employee was negligent. On the other hand, the court could not have come to the judgment for Employee solely on the basis of the finding that Employee was negligent – without the finding that P was contributorily negligent. (Indeed the finding that Employee was negligent was a reason not to give Employee a judgment.) Since the finding was not essential, issue preclusion will not apply.
But, secondly, even if the finding that Employee was negligent had been essential to the earlier judgment, it could not be used to issue preclude P from litigating Employee’s recklessness. To find someone negligent is not to find that he was reckless. Even if the evidence screamed out that Employee was not merely negligent but also reckless, the jury, not being asked whether Employee was reckless (since P was suing Employee for negligence), would have simply come in with its finding that Employee was negligent.