Nonmutual Collateral Estoppel

INTRODUCTION

We began this journey at the beginning (see p. 3), and we should end at the end . . . but nothing is quite that simple in civil procedure. A lawsuit “ends” when a final judgment is entered or an appeal of the trial court judgment is decided. But the suit may send out waves that break on very distant shores. Under collateral estoppel doctrine, issues decided in one lawsuit may have effects in another suit between the parties at a later time or in a different court. And, beyond this fairly well-mapped terrain lies the more obscure kingdom of nonmutual collateral estoppel.

Under traditional issue preclusion principles, a party may be estopped from relitigating an issue that he had litigated in a prior suit and lost. Restatement (Second) of Judgments §27 (1982); Chapter 28, pp. 576-579. Assume, for example, that Cartier sues La Salle, a tenant in his shopping center, for breach of a provision in the standard lease signed by all Cartier’s tenants. If the court finds that the lease provision is invalid, La Salle may estop Cartier in a future suit involving the same lease from claiming that the disputed provision is enforceable. Conversely, if the provision had been held valid, Cartier could estop La Salle from defending a future action based on the same lease on the ground that the provision was invalid.

Nonmutual collateral estoppel goes a step beyond this basic doctrine by allowing a new party to invoke collateral estoppel against a party who litigated and lost on an issue in a prior action. Suppose, for example, that Cartier, after losing his suit against La Salle on the ground that the lease provision was unenforceable, sues Cortez, another tenant who had signed the same standard lease. Under nonmutual preclusion principles, Cortez, the new defendant, could estop Cartier from claiming that the disputed provision was enforceable, since Cartier had previously litigated that issue against La Salle and lost.

For many years, this frontier concept remained, if not undiscovered, at least unexplored by most courts. The general rule was that “estoppels must be mutual,” that is, the only parties who could invoke collateral estoppel were those who were involved in the suit in which the issue was initially decided. This “doctrine of mutuality” allowed La Salle to estop Cartier on the issue of the validity of the lease provision but would not allow Cortez, a stranger to the first suit, to do so. The courts reasoned that La Salle had litigated in the first action; he took the risk that, if he lost on the issue, he would be bound by that finding in subsequent suits, under basic collateral estoppel doctrine, and therefore he—and only he—had earned the right to assert estoppel if he won. But Cortez was not a party to the first action; he took no risk of being bound by an adverse judgment if Cartier proved that the lease provision was valid. Consequently, since he would not be bound by an unfavorable finding, the mutuality doctrine barred Cortez from taking advantage of a favorable finding in the La Salle/Cartier suit.