What is collateral estoppel?
What is the difference with res judicata?
What are the collateral estoppel elements to prove in court?
We will define collateral estoppel, look at the collateral estoppel requirements, look at offensive and defensive litigation strategies, mutuality vs non-mutuality of parties, privity, compare it with claim preclusion (res judicata), examples and more!
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What is collateral estoppel
Common law doctrine
Collateral estoppel is a common law doctrine more commonly known as issue preclusion preventing a person or entity from re-litigating an issue already judged by the court under a different cause of action.
In other words, based on the doctrine of collateral estoppel, when a court renders a judgment on an issue of fact or issue of law, the person can no longer raise the same issue or law in a different cause of action.
The court’s final judgment will have a preclusive effect.
In the United States, based on the Full Faith and Credit Clause found in the U.S. Constitution, final judgments rendered by a state are afforded preclusive effects to avoid the unnecessary multiplication of lawsuits and provide judicial stability to litigants.
The collateral estoppel doctrine does not preclude or prevent a party from appealing a judgment on merits.
However, if a judgment on the merits of a lawsuit is not appealed in accordance with the applicable court rules of procedure, the judgment will become firm and final; thus preclusive.
The objective of collateral estoppel is to ensure that the same legal issues do not get litigated and re-litigated over and over until a party gets a favourable outcome, to prevent legal harassment and to provide an economy of resources and time to courts.
Collateral estoppel definition
According to Cornell Law School’s Legal Information Institute, collateral estoppel is defined as:
Collateral estoppel prevents subsequent litigation of legal determinations of fact and law that have resulted in valid final judgments. All litigants have a “full and fair” opportunity to bring suit except where one party has brought effectively the same suit as defined by the same substantive legal issue in another venue or at another time against the same defendant.
What is notable with this collateral estoppel legal definition is that a person can prevent an issue from being subsequently litigated when the courts had already rendered a valid final judgment dealing with the same “issue”.
Collateral estoppel elements
Let’s look at the issue preclusion elements and see how a litigant can invoke this legal theory to bar another from raising an issue already litigated in court.
Although you must consider the specific collateral estoppel elements in your jurisdiction, typically the following are the requirements you need to demonstrate:
- The “issue” is identical to one already litigated
- The “issue” was fully litigated in the prior lawsuit
- The court rendered a judgment on the “issue” raised in the prior lawsuit
- The “issue” represented an essential component of the court’s decision
Similarity of issues
To determine if an “issue” was already litigated, the courts will assess whether the issues are “identical” or “very similar” to the issues raised in a prior lawsuit.
It’s important to note that the subject matter of a lawsuit is not the same thing as an issue.
You can have a new lawsuit with a new subject matter but raising the same issues as a prior lawsuit that was instrumental to the court’s decision in the prior lawsuit.
In this case, collateral estoppel can still apply.
Issues litigated
When looking at the second element of issue preclusion, the court must be satisfied that the issue was already and actually litigated.
In other words, the issue was actually raised in a prior lawsuit and fairly litigated by the parties.
Collateral estoppel will not apply to an issue that could have been raised in a prior lawsuit but was not.
Finality requirement
Another important element to demonstrate when invoking collateral estoppel is to show that the court, in the previous lawsuit, rendered a final decision or judgment on the merits of the issue.
There must be a finality to the prior judgment.
In other words, if an issue was raised but the court did not consider it or decide upon the issue, the argument of collateral estoppel may not succeed.
Significance of issues
The fourth element is to show that issue that the court decided upon was important or influenced in an important way the outcome of the lawsuit.
In other words, the issue was necessary for the court to reach its conclusion or render its judgment.
Parties to lawsuit
Let’s look at the importance of the parties to a lawsuit when dealing with collateral estoppel arguments.
Mutual vs non-mutual parties
The initial judgment is binding upon the parties to the initial lawsuit along with their representatives or those in privity with them.
As such, a non-party can not easily be collaterally estopped not having the chance to litigate the issue in a fair and complete manner before the courts.
For collateral estoppel to succeed, very often, the identity of the parties in the original lawsuit and new lawsuit are the same (mutuality of parties).
Although the identity of parties is important in many cases, it is not a decisive factor to determine if a collateral estoppel argument can succeed or not.
In the majority of jurisdictions, a non-mutual party may invoke collateral estoppel to preclude an issue already resolved by the court.
Privity requirement
In most cases, it’s pretty straightforward to determine that a person or entity was a party to a lawsuit or not.
We merely look at the parties identified on the docket.
However, in some cases, the determination may not be as simple.
This is when the courts will look at privity to determine if a party to a lawsuit had a close relationship with another party or not.
To conclude privity, the courts must look at the circumstances and the facts of the case to determine if the interests of a party are identified as the interests of another party.
For example:
An agent acting on behalf of the principle will have privity.
A sole shareholder of a corporation may have privity to the corporation’s interests
Collateral estoppel as litigation strategy
How can you use issue preclusion as a litigation strategy to preclude another party from asserting certain issues.
Offensive collateral estoppel
Collateral estoppel may be used as an offensive strategy in lawsuits.
A plaintiff in a new lawsuit can use a prior judgment against a defendant (where the parties to the new suit are the same as the prior suit) to preclude an issue from re-litigation.
This is referred to as the offensive mutual collateral estoppel or offensive mutual issue preclusion.
We say “mutual” as the parties to the new lawsuit are the same as the parties to the prior lawsuit where a final judgment was issued.
A plaintiff who was not a party to a prior lawsuit implicating the defendant can use the prior judgment involving the defendant to argue that the issue should be precluded from re-litigation.
This is referred to as the offensive non-mutual collateral estoppel, offensive non-mutual issue preclusion or non-mutual offensive collateral estoppel.
We say “non-mutual” as the plaintiff asserting the doctrine of collateral estoppel was not a party to the prior judgment involving the defendant.
Defensive collateral estoppel
Collateral estoppel may be used as a defensive strategy by a person who is served with a lawsuit containing issues already litigated with the same plaintiff in a prior lawsuit.
This is referred to as the defensive mutual collateral estoppel or defensive mutual issue preclusion.
It’s “mutual” as the matter involves the same parties as the parties to the prior lawsuit.
A person may also use a prior judgment to preclude an issue against a plaintiff even though he or she was not a party to a prior lawsuit when the matter or issue was already decided by the court.
This is referred to as the defensive non-mutual collateral estoppel or defensive non-mutual issue preclusion.
It’s “non-mutual” as the defendant was not a party to the initial lawsuit.
It must be noted that the courts may be more reluctant to preclude an issue that did not involve the same parties (non-mutual collateral estoppel).
Fundamentally, everyone is entitled to be heard in court.
As a result, if a person or litigant did not have an opportunity to litigate a matter or issue, the courts may find it unjust to preclude a person from being heard.
Collateral estoppel limitations
The collateral estoppel legal theory does have some limitations that may result in an undesirable or unjust outcome.
Every person has the right to be heard in court and assert their legal rights through the judicial system.
As such, to be fair and in compliance with due process, the theory of collateral estoppel should not be used against a person or entity who was not a party to a lawsuit.
On this basis, the results of a lawsuit involving other parties should not preclude another from asserting his or her rights in court even though the other lawsuit involved the same facts and legal issues.
Another limitation of the collateral estoppel doctrine is that a litigant may use an offensive collateral strategy in a way that may be unjust.
In certain cases, when several parties are entitled to assert the same claim on the basis of the same issue, they may tactically choose to have one of them file a lawsuit against the defendant to see if the case succeeds or not.
If the defendant’s case is strong, the other plaintiffs will not choose not to file a lawsuit.
However, if the defendant’s case is weak, the other plaintiffs will then file a lawsuit and use an offensive collateral estoppel strategy to dominate the defendant in court on a particular issue.
Even though it may not work perfectly all the time, the main objective of issue preclusion is to avoid multiplication of lawsuits, give a fair legal chance to all and provide legal stability to the parties when a matter is dealt with by the court.
Res judicata vs collateral estoppel
Collateral estoppel vs res judicata can also be framed as collateral estoppel vs claim preclusion.
Both res judicata and collateral estoppel are similar in the sense that they are used to preclude the assertion of certain matters in court but they are also different.
Res judicata is Latin for “that which has been judged” is also known as “claim preclusion”.
The claim preclusion legal theory is used to bar a party from filing a lawsuit on the same cause of action against the same parties as a prior lawsuit that has already been judged on its merits.
Typically, when a party attacks the validity of a lawsuit on the basis of res judicata, the court will bar the new lawsuit in its totality from moving forward.
On the other hand, collateral estoppel is known as “issue preclusion”.
Under the collateral estoppel issue preclusion, a party may invoke this legal theory against subsequent lawsuits based on a different cause of action but based on the same issues litigated in a prior lawsuit.
Invoking collateral estoppel may not necessarily be conclusive on all issues raised in the new lawsuit but can bar specific issues previously litigated.
Collateral estoppel example
Let’s look at a few examples of collateral estoppel to see how it works.
Example 1: Shareholder dispute
In a shareholder dispute, if the court establishes the redemption price of a company’s preferred shares, the corporation may be estopped from disputing the redemption price in a subsequent lawsuit as this “issue” was already decided by the court.
Example 2: Insurance
An insurance company using the same contractual provision in many insurance policies may consider invoking collateral estoppel to prevent the same provision to be disputed multiple times in court.
Collateral estoppel FAQ
What are the elements of collateral estoppel
There are four elements to establish collateral estoppel:
What is the difference between res judicata and collateral estoppel
Res judicata or claim preclusion is a legal theory used to bar a party from filing a lawsuit against the same parties when the same cause of action has already been litigated and judged by the court.
Res judicata will generally have a decisive impact on all matters of the new lawsuit.
Under the issue preclusion doctrine, a party may bar specific issues from being re-relitigated in a new lawsuit based on another cause of action.
Collateral estoppel may be conclusive on specific issues of a new lawsuit but not necessarily on the entire lawsuit.
What does estoppel mean in law
“Estoppel” is a common law legal vehicle preventing, stopping or precluding a person from making certain statements, assertions, claims or reneging on what was previously stated.
In essence, a person is “estopped” or “precluded” from claiming or asserting something.
Is collateral estoppel an affirmative defense
Collateral estoppel can be used as an affirmative defense in two ways:
- Defensive mutual collateral estoppel
- Defensive non-mutual collateral estoppel
This doctrine may be used as a defensive strategy by a person who is served with a lawsuit relating to the same issues already litigated with the same plaintiff in a prior lawsuit.
This is considered a mutual issue preclusion.
A person may also use a prior judgment to preclude an issue against a plaintiff even though he or she was not a party to a prior lawsuit when the matter or issue was already decided by the court.
This is considered to be a non-mutual issue preclusion.
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