Berlitz Schools of Languages of America v. Everest House

Brief Fact Summary.

Berlitz Schools of Languages of America (Plaintiff) sued Charles Berlitz (Defendant) for unfair competition. The court found for Defendant based upon a disclaimer on his materials. Plaintiff then raised the matter again in federal court where the court found its claim barred by the previous ruling.

Synopsis of Rule of Law.

An issue that has been finally and necessarily resolved through prior litigation is barred by collateral estoppel from subsequent adjudication.

Facts.

Plaintiff brought an action against Defendant in New York state court for unfair competition and trademark infringement, claiming that the notice printed on Defendant’s language materials disclaiming affiliation with Plaintiff was inadequate to avoid public confusion. The court found for Defendant, finding the disclaimer to be sufficient. At some point later, Defendant shrunk the size of the printed disclaimer, but left the content the same. Plaintiff then sued in federal court, claiming unfair competition and trademark infringement under the Lanham Act. The federal district court granted Defendant’s motion for summary judgment, ruling that the new suit was barred by collateral estoppel. Plaintiff appealed, arguing that the change in the size of the disclaimer made it a different factual scenario than the previous case and that collateral estoppel, therefore, did not apply.   

Issue.

When an issue has been finally and necessarily resolved through previous litigation, is a subsequent adjudication barred by the doctrine of collateral estoppel?

Held.

(Lumbard, J.) Yes. An issue that has been finally and necessarily resolved through prior litigation is barred by collateral estoppel from subsequent adjudication. The change in the size of the printed disclaimer did not present a different factual issue than the previous litigation. The content of the disclaimer was found to be sufficient, and has not changed. The issue concerning the adequacy of the disclaimer was finally and necessarily settled in the state court proceeding and is barred from relitigation by collateral estoppel. Affirmed.

Discussion.

The doctrine of res judicata bars subsequent litigation of an issue following: 1) a final judgment, 2) on the merits, 3) from a court of competent jurisdiction. While the court here referred to the doctrine as res judicata, modern courts would call it collateral estoppel since the term more precisely describes an issue raised in an action separate from the initial litigation. Collateral estoppel may be invoked to bar the relitigation of any issue which was “actually litigated” in a prior case and “essential” to the original determination. While collateral estoppel is one of the effects of res judicata, the common usage of the term res judicata refers to the doctrine that gives effect to merger and bar of a case previously litigated to final judgment. Collateral estoppel is commonly used to refer to the doctrine that gives effect to an estoppel on an issue previously settled by prior litigation.