A. Scope: All courts agree on the principle that where two parties have fully litigated a particular claim, and a final judgment has resulted, that claim may not later be relitigated by the loser. All courts are similarly in agreement that if a particular finding of fact has been made in the course of a lawsuit between two parties, that issue of fact may not later be retried by the loser, even though the cause of action is different in the second suit. The entire set of rules that prevent re-litigation of claims and issues is often collectively referred to as the doctrine of “res judicata” (Latin for “things which have been decided”).
1. Merger and bar: The rules that prevent a claim (or as it is sometimes called, a cause of action) from being relitigated are called the rules of claim preclusion. Two separate but closely related rules, the rule of “merger” and the rule of “bar,” make up the doctrine of claim preclusion.
a. Merger: If plaintiff wins the first action, his claim is “merged” into his judgment. He cannot later sue the same defendant on the same cause of action for higher damages.
b. Bar: If the plaintiff in the first action loses, his claim is extinguished, and he is “barred” from suing again on that cause of action.
Note: The term “res judicata” is sometimes used to refer solely to the rules of claim preclusion. But we use that term in this chapter in its more general sense, to encompass both the rules of claim preclusion and the rules (summarized immediately below) of collateral estoppel.
2. Collateral estoppel: If a particular issue of fact or law has been determined in one proceeding, then in a subsequent proceeding between the same parties (even on a different cause of action), each party is “collaterally estopped” from claiming that that issue should be decided differently than it was in the first action. Thus the doctrine is usually called collateral estoppel.
a. “Issue preclusion”: The doctrine generally referred to as collateral estoppel is sometimes also called “issue preclusion,” to reflect the fact that what is being prevented from relitigation is an issue. The phrase “issue preclusion” has the advantage of contrasting sharply with its opposite, “claim preclusion.” Partly for this reason, the Second Restatement of Judgments favors the terms “claim preclusion” and “issue preclusion.” See Rest. 2d, Introduction to Chapter 1. Notwithstanding the growing use of the term “issue preclusion,” we use the more traditional “collateral estoppel” here.
b. Mutuality: Most courts, until the 1960s, applied the doctrine of collateral estoppel only where the parties in the second action had both been present in the first action. A stranger to the first action could not in the second action assert that his adversary (who had been a party in the first action) was collaterally estopped from relitigating an issue decided in the first action—the reason for this was that the stranger could not have been bound by a finding of fact in the first action unfavorable to him (the requirements of due process prevent binding a party without giving him a day in court). Therefore, courts reasoned, it was unfair to give the stranger the benefit of the first action, where he could not have been saddled with the burden of that action. The rule that a stranger to the first action could not assert collateral estoppel against one who had been a party to that first action is known as the doctrine of mutuality.