Two weeks ago we reported on a case that refused to apply offensive non-mutual collateral estoppel, the doctrine that prevents a defendant from relitigating an issue that it lost in earlier litigation against a different plaintiff. Although we weren’t impressed by that decision’s analysis, its outcome was one we could endorse. Today we report on another case involving offensive non-mutual collateral estoppel, Freeman v. Ethicon, Inc., 2022 WL 3147194 (C.D. Cal. 2022). This time, we are neither impressed by the decision’s analysis nor happy with its result.
Indeed, Freeman illustrates why offensive non-mutual collateral estoppel is systematically unfair to defendants.
Alleging that they were injured by one of the defendants’ pelvic mesh devices, the Freeman plaintiffs moved for partial summary judgment, arguing that at trial the defendants should not be allowed to dispute certain factual findings entered by a state-court judge after a bench trial in earlier false-advertising and unfair-competition litigation.
In Parklane Hosiery Co. v. Shore, 439 U.S. 322, 330–31 (1979), the Supreme Court identified four non-exhaustive factors that federal courts should consider when determining whether application of offensive non-mutual collateral estoppel would be fair in a particular case: (1) whether “the plaintiff had the incentive to adopt a ‘wait and see’ attitude in the hope that the first action by another plaintiff would result in a favorable judgment”; (2) whether the defendant had the incentive to defend the first suit; (3) whether one or more judgments entered before the one invoked as preclusive are inconsistent with the latter or each other, suggesting that reliance on a single adverse judgment would be unfair; and (4) whether the defendant might be afforded procedural opportunities in the later action that were unavailable in the first and “could readily cause a different result.”
In Freeman, the defendants argued that applying offensive non-mutual collateral estoppel would be inappropriate under Parklane and would violate their Seventh Amendment right to a jury. The court rejected the defendants’ arguments at every turn.
The court acknowledged that “[t]he existence of inconsistent prior judgments is perhaps the single most easily identified factor that suggests strongly that neither should be given preclusive effect.” 2022 WL 3147194, at *4 (quoting Wright & Miller, 18A Fed. Prac. & Proc. § 4465.2 (3d ed. Apr. 2022 Update)). The court also acknowledged that in the past decade there have been two dozen jury trials involving the defendants’ mesh products, with plaintiffs winning some and the defendants winning others. Nonetheless, despite the conflicting product-liability verdicts, the Freeman court thought it appropriate to give preclusive effect to the adverse findings entered in the false-advertising and unfair-competition litigation because, said the court, the findings of fact entered by the state-court judge at the conclusion of the bench trial in that case “were specific” while the verdicts for the defense in the product-liability trials did not contain “any specific” contrary findings of fact. Id. at *5. But juries often return general verdicts. Indeed, the Freeman court explained that in one of the product-liability trials resulting in a defense verdict the jury had no need to make particularized findings of fact because it concluded that, whatever the product’s characteristics, the defendants were not negligent in designing it. Yet rather than view the general defense verdict as weighing against application of offensive non-mutual collateral estoppel, the court considered its very generality a factor in favor of applying the doctrine to prevent the defendants from contesting certain elements of liability. In effect, the court concluded that the defendants should not be allowed to offer a defense because the earlier verdict in their favor had been too categorical.
The court also rejected the defendants’ argument that the state-court findings should not preclude relitigation of the factual issues because those findings rest on evidence that would not be admissible in federal court. The defendants argued that the state-court findings rest on expert testimony that was admitted under California’s Kelly-Frye standard but has been repeatedly excluded by federal courts applying the Daubert standard (or, as we like to say, Federal Rule of Evidence 702). This reality didn’t impress the Freeman court, which found that “the differences between the Kelly-Frye and Daubert standards do not rise to the level of procedural differences contemplated” by Parklane because, said the court, “the overlap of the two standards generally results in the same evidence being admitted.” 2022 WL 3147194, at *5.
Nor was the court impressed by the existence of new evidence that became available only after the state court that had entered the purportedly preclusive findings. Applying California law (because it was sitting in diversity), the court held that “even if new evidence was not previously available, collateral estoppel will still apply if the new evidence goes only to the weight of the evidence in support of the party who opposes preclusion.” 2022 WL 3147194, at *6 (cleaned up). In other words, in the court’s view, a prior weight-of-the-evidence determination is forever binding even when there is new evidence to be weighed in the balance.
The court also was not deterred by the Seventh Amendment. Citing numerous cases refusing to give preclusive effect to findings made in prior bench trials, the defendants argued that giving preclusive effect to findings made by a judge would deprive them of their right to a jury trial. None of the cases cited by the defendants were apposite, said the court, because the supposedly preclusive findings at issue in them “were made in prior federal court cases[,] whereas in this case, the findings were made in state court.” 2022 WL 3147194, at *6. That distinction was dispositive, the court asserted, because “[t]he Seventh Amendment is not applicable to the states.” Id. (internal quotation marks omitted). But that is irrelevant. The findings would be given preclusive effect in federal court, where the Seventh Amendment unquestionably applies. The question is not whether the defendants had a right to a jury trial in state court, but whether they can be denied that right in federal court. According to the Freeman court, they can be.
Summarizing its analysis, the Freeman court found that “issue preclusion in this case is fair under the Parklane factors.” 2022 WL 3147194, at *7. We have a very different notion of fairness.