Nonparty Claim Preclusion

For nearly two centuries, American courts recited that the preclusive effects of a court’s final judgment were subject to a requirement of “mutuality,” meaning that a party in Lawsuit 2 who would not be bound by a judgment from a prior Lawsuit 1 could not benefit in Lawsuit 2 from the first lawsuit’s judgment either. While the Supreme Court eliminated the mutuality requirement for issue preclusion in the 1970s—paving the way for “nonmutual collateral estoppel”—to this date, the Court has not decided if mutuality remains a requirement for claim preclusion. Although many courts today insist there is no such thing as nonmutual claim preclusion, this Article shows otherwise. Unfortunately, the Article also reveals that the law of nonmutual claim preclusion is an awful mess. There are a startling number of poorly reasoned and poorly decided cases—some denying preclusion on demonstrably unsound logic, and many others that have been too quick to find preclusion. T he plethora of mistakes owes partly to the complexities that invariably accompany any assertion of nonmutual claim preclusion: a multiplicity of lawsuits, parties, and claims. The Article provides new terminology and tools that make it easier to see what’s actually happening and avoid future mistakes. But the problems run so deep as to require a radical doctrinal overhaul. Although the Supreme Court’s arguments for rejecting mutuality in the realm of issue preclusion were sound and fully carry over to claim preclusion, the Court’s arguments have been saddled with more weight than they can bear. The core justification for rejecting the mutuality requirement is that mutuality is normatively irrelevant. But that’s not a reason for nonmutual claim preclusion; mutuality’s irrelevance only means that a lack of mutuality is not a reason for rejecting claim preclusion. And because the two types of preclusion operate so differently, the justifications for nonmutual issue preclusion do not seamlessly carry over to nonmutual claim preclusion. Moreover, the most widely used legal tests for deciding nonmutual claim preclusion—privity and cognates like the “closely related” requirement—are logically inconsistent with mutuality’s rejection. As the Article shows, privity grew out of the mutuality requirement and focuses attention on considerations that the mutuality requirement (mistakenly) presumed were normatively rele- vant. The rejection of the mutuality requirement entails rejecting privity as well, meaning that the current legal tests’ reliance on privity is inapt. For these and other reasons, the Article argues that “nonmutual claim preclusion” should be renamed “nonparty claim preclusion.” Building on all this, the Article provides a novel, common-sense legal test that directs attention to the normatively relevant considerations that ought to guide nonparty claim preclusion determinations. One of the Article’s most important conclusions is that nonparty claim preclusion does not advance fairness concerns but instead mediates between the plaintiff’s litigation autonomy and the efficient use of judicial resources. By reorienting doctrine to what is truly at issue, the Article’s proposed legal test holds out the promise of harnessing the common law’s inductive powers, potentially allowing for the development of a sensible doctrine over time. But as the Article clarifies the confounding empirical and normative questions with which a rational doctrine would have to wrestle, the Article also forthrightly considers whether nonparty claim preclusion is worth the candle. Regardless of the ultimate conclusion, the Article disposes of a red herring: although the Federal Rules of Civil Procedure do not presently address nonparty claim preclusion, the procedural code’s silence does not in and of itself discredit the doctrine.