Not Final

Contreras-Velazquez v. Family Health Cntrs. of San Diego, No.D075577 (D4d1 Mar. 18, 2021)

In rendering a verdict that Defendant isn’t liable, Jury in trial #1 makes a bunch of findings. But the trial court found that there was inadequate evidence to support that result. It granted a new trial on liability, which was affirmed on appeal. At retrial, Defendant argued that certain of the findings in trial #1 were issue preclusive on trial #2. 

But that doesn’t make sense. Issue preclusion or collateral estoppel requires the issue to have been decided in the first proceeding in a decision that was final and on the merits. A jury’s factual finding, upset by a new trial order that is then affirmed on appeal is definitely not final. The effect of a new trial grant is to vacate the judgment and the findings that support it. It thus cannot be the case that factual findings that undergird a verdict that is vacated on a new trial grant have any finality to them. Indeed, if the new trial grant is affirmed, there is no way that the findings could have been reviewed and affirmed on the merits in the first appeal. 

Affirmed.

Properly Certified

Williams v. U.S. Bankcorp. Investments, Inc., No. A156226 (D1d4 Jun. 8, 2020)

Plaintiff in this wage and hour class action was an absent member of a class in an earlier class action, wherein a class was certified, but later decertified. Defendant says Plaintiff is collaterally estopped from certifying a class here by the force of the decert order in the earlier case.

Under an earlier line of cases, California law ultimately settled on the rule that an absent class member is not precluded by an order denying class certification in an earlier case. That’s because, prior to certification, an absent member of a class isn’t really a party or in any privy or representative relationship with any party. So the mutuality element is absent.

But once a class has been certified, the lead plaintiff takes on a representative role with the rest of the class and is capable of taking action in the litigation that can have a binding effect on the rest of the class. According to the Court of Appeal, however, that still isn’t enough to bind Plaintiff here to the decertification ruling in the prior case.

First, in contrast to federal law, California law has long viewed members of a certified class as non-parties. So, for instance, a class member who objects to the settlement needs to intervene before he or she has standing as a party to appeal.

More importantly, perhaps, is that preclusion generally applies to members of a properly certified class. The whole purpose of the class certification process is make sure the class is structured such that lead plaintiffs and their lawyers can adequately represent the interests of absent class members. But a class that gets de-certified is a class where those features are lacking in some meaningful way. And the fact that flaws in the structure don’t become clear until sometime after a class has been improvidently certified doesn’t mean that the class was properly certified in the interim.

Reversed.

What's Your Issue, Textron?

Textron, Inc. v. Travelers Cas. & Sur. Co., No. B262933 (D2d4 Feb. 25, 2020)

Back in 1991, in connection with a large exposure for environmental contamination, Insured won a declaratory relief claim that a CGL policy with Insurer was governed by Rhode Island law. Thirty years later, Insured settled a mesothelioma case with an employee who was allegedly exposed to asbestos from 1950 to 1983. Insured now seeks coverage under the GCL policy.

The coverage question turns on the meaning of “occurrence” as applied to a continuous or progressively deteriorating personal injury. That question has different answers under California and Rhode Island law. Basically, under California law, coverage reaches back to any partial harm within the policy period, while Rhode Island law would cover only if the meso diagnosis was within the period. So the ultimate question on this appeal is whether the 1991 dec. relief ruling collaterally or judicially estops Insured from arguing that California law applies.

The trial court ruled that it didn’t, which resulted in denial of Insurer’s summary judgment motion. Insurer took a writ. A Palma notice issued. In response to which, a different trial court reversed course, finding that it does, which mooted the writ. That led to summary judgment for Insurer. 

Insured now appeals. The Court of Appeal reverses.

Collateral estoppel requires a the same issue to be actually litigated and decided in a prior action in which the party to be estopped was a party. The question here is whether the “issue” was same in 1991. The nature of an “issue” is a squishy topic. It’s basically a question of application of law to fact. On one hand, there can be estoppel on an issue even though specific factual or legal theories that could have been presented in the first case were not. On the other hand, there is no estoppel on an issue that could have been raised but wasn’t. As the Court explains, “[p]utting it as simply as we can, the factual predicate of the legal issue decided in the prior case must be sufficient to frame the identical legal issue in the current case, even if the current case involves other facts or legal theories that were not specifically raised in the prior case.” Satisfied?

That being said, the Court holds that, even though they facially answer the same basic question—what law applies to “occurrence”?—the cases nonetheless do not present the same issue. That is because the factual framing behind the choice of law question is so different. The dispute in the 1991 case was over 258 different insurance policies issued by 49 different carriers arising from environmental contamination in 19 different states. On the other hand, the 2011 meso case entailed an ongoing injury to a single plaintiff who lived in California.

Looking at California’s “government interest analysis” for choice of law—which the court assumes is the same as Rhode Island’s test—the inputs that go into that analysis are totally different. That was borne out by an analysis of the 1991 decision. Nowhere did that decision address, for instance, whether there was an actual conflict of law between Rhode Island and California. Nor did it look to California’s interest in defining “occurrence” to a Californian injured by conduct that occurred in California. Thus, despite the superficial similarity, the cases do not entail litigation of the same issue, so collateral estoppel can’t apply.

Reversed.

Flipped Burden Prevents Issue Preclusion

Bennett v. Rancho Cal. Water Dist., No. G054617 (D4d3 May 29, 2019)

Collateral estoppel doesn’t apply when, during the first proceeding, the party seeking preclusion bore a lower burden of proof. Here, the prior case was an administrative employee benefits proceeding. In it, the employer bore the burden to prove that plaintiff was not an employee. It did not meet it. But now we’re in a whistleblower retaliation case where the plaintiff bears the burden to prove he is an employee. So plaintiff can’t rely on the defendant’s failure to meet its burden in the admin case for issue preclusion on the employment issue.

Reversed.

Res Estoppel? Collateral Judicata?

Shine v. Williams-Sonoma, Inc., No B277513 (D2d4 May 29, 2018)

Named Plaintiff in this class action was a class member in Class Action #1, a prior wage and hour case against his Employer. Class Action #1 settled and, as a member of the settlement class, Plaintiff got some money. But now he’s a Named Plaintiff in Class Action #2, another wage and hour class action, against the same employer, with roughly the same class period, but on a new legal theory that wasn’t really litigated in Class Action #1. So the question is, do claim or issue preclusion, or the release entered in Class Action #1, bar Class Action #2?

The answer is yes. And the opinion gets that right. But it’s rather hard to follow and it does some weird stuff to getting to a result. 

If It Evades Review, It Evades Preclusion

Samara v. Matar, No. S240918 (Cal. Jun. 25, 2018)

The Supreme Court here upholds a 2017 Court of Appeal ruling, albeit on slightly different grounds.

Some Tricky Stuff About Privity

Cal. Sierra Dev., Inc. v. George Reed, Inc., No. C080397 (D3 Aug. 22, 2017)

MineCo and SurfaceCo share rights to some land. Under their agreement, MineCo has the right to mine for gold and SurfaceCo has the right to the surface. SurfaceCo licenses its right to OppCo to build a plant on the surface. Problem is, that interferes with MineCo’s operations. 

There's No Intra-Case Res Judicata

Samara v. Matar, No. B2657525 (D2d7 Feb. 15, 2017)

P brings a dental malpractice claim against Dentist and against Dentist’s Employer. Employer was sued both on a respondeat superior theory and for negligently retaining Dentist, who supposedly had some licensing issues. Dentist wins SJ on the alternative grounds of the statute of limitations and lack of causation. The court of appeal affirms on the SOL, but expressly doesn’t reach causation. On remand, Employer moves for SJ, arguing that the prior no-causation ruling is preclusive in a way that prevents vicarious liability based on Dentist’s conduct. Trial court grants the motion.

There’s a bunch of case law that says that non-mutual collateral estoppel can’t apply to an adverse finding that is appealed, but which the appellate court expressly declines to reach. The trial court here, however, tried to sidestep those cases by claiming that the issue here was res judicata, not collateral estoppel. (Viz., claim, not issue, preclusion). But the preclusive power of res judicata applies only to separate lawsuits. As the judgment against Dentist was entered within the same case, res judicata doesn’t apply. 

Which means if there’s going to be preclusion, it will have to come from collateral estoppel. But collateral estoppel only applies to issues that are actually decided. And the cases are pretty clear that an issue isn’t “actually decided” when it’s appealed but the appellate court expressly declines to reach it. 

Reversed.

Having a Bankrupt Co-Fraudster Doesn't Get You Off the Hook

Patel v. Crown Diamonds, Inc., No. G051439 (D4d3 Apr. 29, 2016)
A bunch of guys and their company allegedly swindled a Widow out of her money. One of the guys went BK and had all his debts discharged, over Widow’s objection. But the others didn’t go BK. Nor did their company. The widow sued them for fraud. Defendants moved for sanctions, claiming that the case was frivolous because the rejection of Widow’s objection to the discharge of BK guy’s debts barred the claims under res judicata. For some crazy reason, the trial court agreed, struck plaintiff’s complaint, and awarded Defendants over $12k for their fees.

The Court of Appeal reverses. A discharge against one party to a multi-defendant tort does not discharge the others unless they are in privity. And as the Supreme Court recently explained in the DKN case, ordinary joint tortfeasors like co-fraudsters are not in privity for preclusion purposes. If three guys commit fraud and one of them gets out—whether by discharge in BK, settlement, release, or judgment—res judicata doesn’t bar claims against the others. Nor would collateral estoppel apply because there was no common issue decided adversely to Widow’s claim in that proceeding.

Reversed.

Palmetto State Hail Mary Falls Flat in D2d6.

Hawkins. v. Suntrust Bank, No. B264541 (D2d6, on denial of rehearing, April 4, 2016)

Plaintiff’s South Carolina residence got judicially foreclosed on by a court there. She tried to challenge that by filing a wrongful foreclosure case against the bank in Ventura County. But under res judicata principles, the South Carolina judgment is preclusive. Plaintiff tries to argue that there was no personal jurisdiction in the South Carolina case, which would be a legit ground to avoid preclusion. Her problem is that the South Carolina judgment contains a factual finding that she was, in fact, served with a summons and complaint in the judicial foreclosure case. And she can’t attack that factual finding by filing a new case here.

Plaintiff further objects to the taking of judicial notice of the order containing the findings, but that fails too. Generally speaking, court documents are subject to judicial notice of their existence, but not for the truth of any statements contained in them. Here, the service finding in the South Carolina judgment is not significant because it proves that plaintiff was, in fact served. To the contrary, it is significant because it shows that the South Carolina court found she was served, which meets the test for the purposes of preclusion, regardless of whether it is ultimately true or not. 

Affirmed.

On the Merits...

Hardy v. America’s Best Home Loans, No. F067389 (D5 Dec. 22, 2014)

Plaintiff filed a pro se federal case against defendant, which was ultimately dismissed “on the merits” under Federal Rule of Civil Procedure 41(b) because he failed to file an amended complaint after a motion to dismiss with leave to amend was granted by the federal district court. Plaintiff re-filed his claims in state court, based on the same factual allegations. On the eve of trial, defendant moved for judgment on the pleadings, on the grounds that the claims were barred by the collateral estoppel effect of the prior dismissal. The trial court granted the motion.

On appeal, the parties agree that a dismissal for failure to prosecute is has no preclusive effect under California law because they are not “on the merits.” But defendant argues that federal common law—the law of the venue entering the prior dismissal—controls the preclusivity of the order. It says that the court’s designation of the Rule 41(b) dismissal as “on the merits” means that the dismissal did have preclusive effect.

That is about one-third right. As the Supreme Court explained in Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 503 (2001), federal law does control the preclusive effect of a prior federal judgment. But Rule 41(b)’s designation of a dismissal as “on the merits” does not control the issue, federal common law does.  And when the judgment is a state law claim brought in diversity, the federal rule generally borrows the state rule of decision, absent some incompatibility with federal interests.  Because the claims at issue here were state law claims, there would be no preclusion because California law would not interpret the state equivalent of a Rule 41(b) dismissal for failure to prosecute as having a preclusive effect.

The court goes on to say that even if the federal rule applies, there would nonetheless be no collateral estoppel because plaintiff’s claims were not actually litigated in the prior case—a requirement for federal issue preclusion.  Even if a dismissal under Rule 41(b) as a penalty for failure to prosecute could give rise to preclusion under res judicata, since it does not actually litigate the merits of the claims, dismissing them based on collateral estoppel would have been inappropriate. (Which begs the question -- Why didn’t defendant move for judgment on the pleadings on res judiciata too?).

Reversed.

Building Permit Does Not Include a Dose of Collateral Estoppel

Bowman v. Cal. Coastal Commission, No. B243015 (D2d6 Oct, 23, 2014)

A county imposed a beach access condition on granting a building permit, which the property owner did not challenge through administrative mandamus.  The owner never actually performed the permitted construction. The property owner later applied for a second permit to replace a structure on the property. The application also requested removal of the access condition. The county approved the request.

But the Sierra Club and the Surfrider Foundation appealed the removal of the condition to the Coastal Commission, which decided that the issue had been settled by the non-appeal of the first permit’s imposition of the condition. The court here holds that although collateral estoppel can arise from a quasi-judicial administrative decision, it would be inequitable to apply the doctrine here. The access easement would not stand up to the Nolan/Dolan takings test. And particularly given that the owner didn’t actually do the work under the first permit, it would be unfair to apply collateral estoppel to the present circumstances.

Reversed.

The "Wrongness" Exception to Collateral Estoppel

Gottschall v. Crane Co., A136516 (D1d2 Oct. 22, 2014)

Asbestos plaintiffs often sue numerous defendants who might have been the supplier of the asbestos that caused their disease.  Here, plaintiff sued a bunch of defendants in San Francisco Superior Court and a few more in the Northern District of California.  The federal case got transferred to the big federal asbestos MDL in Philadelphia, and the MDL panel ultimately dismissed the case based on the sophisticated user defense.  One of the defendants in the state court case then moved for summary judgment on the grounds that the plaintiff was collaterally estopped by the federal decision to deny the defense. The trial court granted the motion.

The court here declines to apply collateral estoppel. The federal court made an incorrect decision on a pure question of California law. Prior court of appeal cases have held that collateral estoppel will not bind California courts to erroneous interpretations of California law by non-California courts. Further, applying collateral estoppel to bind the plaintiff to an erroneous application of California law by a foreign court would work an injustice.

Reversed.

**If this ruling sounded a little strange, maybe it is. The California Supreme Court granted review on January 21, 2015.