Claim Preclusion, Issue Preclusion, and the Various Forms of Res Judicata

This isn’t what I was taught in law school 20 years ago, but res judicata comes in many flavors. I was taught that there were only two doctrines relating to re-litigating civil claims: claim preclusion, known as res judicata, and issue preclusion, known as collateral estoppel. That’s wrong, at least here in Virginia. In an opinion published earlier today by the Virginia Supreme Court, the court describes in detail how there are actually four different types of res judicata: two types of claim preclusion (“bar” and “merger”) and two types of issue preclusion (“direct estoppel” and “collateral estoppel”). All four of these concepts fall under the res judicata umbrella.

The case is Paul Lee v. Lisa Spoden, originally filed in Fairfax County Circuit Court. Lee formed Strategic Health Care Company, Inc. (“SHC”), a consulting company providing services to healthcare organizations and professionals, in 1994, and gave Spoden (his wife–or maybe fiancee–at the time) a 50% ownership interest the following year. When they divorced in 2009, the parties entered into an agreement in which Spoden agreed to give up her 50% interest in exchange for a number of things, including the right to “direct use” of certain real estate owned by the company, and to receive all proceeds when the property was sold. In 2013, Spoden filed an action against Lee for breach of contract and breach of fiduciary duty, claiming that he had listed the property for sale without her knowledge or permission and that he had violated various other provisions of the property settlement agreement, which was incorporated (but not merged) into the final divorce decree.

The trial court allowed the contract claim to go forward but sustained a demurrer to Spoden’s claims for breach of fiduciary duty, declaratory relief, specific performance, and permanent injunction, instructing Spoden that the appropriate vehicle for such relief would be a petition for a rule to show cause why Lee should not be held in contempt for violation of the divorce stop.jpgdecree. So Spoden took the hint and filed a petition, and the parties proceeded with an evidentiary hearing on the contempt charge.

It was this contempt proceeding that ultimately served as the basis for application of res judicata. The court heard evidence and made several factual findings, including that SHC “has the right to sell the Property.” The issue on appeal was whether this ruling mandated the entry of summary judgment in the breach of contract action.

The Virginia Supreme court found that res judicata did indeed bar the breach of contract action. Res judicata, it explained, encompasses four distinct concepts: merger, direct estoppel, bar, and collateral estoppel. Each of these effects can be divided into two categories: claim preclusion and issue preclusion, as follows:

Claim Preclusion. Under this doctrine, a final judgment forecloses successive litigation of the same claim, whether or not relitigation of the claim raises the same issues as the earlier suit. This concept is found in Rule 1:6 of the Rules of the Supreme Court of Virginia.

Bar. This falls under the claim-preclusion category. Bar arises when a valid and final personal judgment is entered for the defendant; the judgment is said to bar relitigation of the same cause of action, or any part thereof which could have been litigated, between the same parties and their privies. (For purposes of res judicata, “privies” refers to parties “in privity” with one another, which exists when a party’s interest is so identical with another that representation by one party is representation of the other’s legal right).

Merger. This is also a form of claim preclusion. Merger arises when the earlier judgment is for the plaintiff; the cause of action is said to merge into the judgment and thereby become extinguished.

Issue Preclusion. This doctrine bars successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment, even if the issue recurs in the context of a different claim. Issue preclusion includes the concepts of direct estoppel and collateral estoppel.

Direct Estoppel. A form of issue preclusion, direct estoppel arises when a defendant has won a judgment NOT on the merits. A plaintiff’s cause of action may survive the judgment, but the parties will be precluded in any subsequent action based on that cause of action from relitigating any issue actually litigated and determined by the judgment.

Collateral Estoppel. This arises when the subsequent cause of action differs from the first, but the parties and their privies are the same. Collateral estoppel precludes the parties from relitigating any issue of fact actually litigated and essential to a valid and final personal judgment in the first action.

The court found that the outcome of the contempt proceeding precluded Spoden from pursuing any further claims against Lee based on the same alleged violations of the property settlement agreement. The parties between the two actions were in privity and the two proceedings involved the same conduct, transaction, or occurrence. Therefore, claim preclusion applied.

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