Twice this year we have reported on trial-court decisions addressing application of offensive non-mutual collateral estoppel—an offensive doctrine that precludes a defendant from relitigating an issue that it lost in earlier litigation against a different plaintiff. One court applied it; the other refused to. Today we report on a Sixth Circuit decision that affirmed, over a spirited dissent, application of the doctrine in a follow-on MDL case.
Our earlier posts catalog the doctrine’s unfair, pernicious results. A quick refresher:
Offensive non-mutual collateral estoppel risks perpetuating an erroneous result by preventing relitigation of issues previously decided against a defendant. If applied, the doctrine can give disproportionate—and potentially dispositive—weight to the decision of a lone judge or jury, no matter how wrong that decision.
The fact that an adverse judgment in one case can cripple a company’s defense in subsequent cases has two adverse consequences apart from the danger of perpetuating error. First, it gives plaintiffs tremendous leverage in settlement negotiations. Second, it induces defendants to spend much more litigating a case than would be warranted by the amount nominally in dispute.
Because it can cripple a company’s defense, offensive non-mutual collateral estoppel can be outcome determinative. Thus, the question whether it applies in a particular case is an important question when it arises. It is especially important in MDLs (and other coordinated proceedings) given the larger number of follow-on cases in which the doctrine could theoretically be invoked.
The case we report on today, Abbott v. E. I. du Pont de Nemours & Co., — F.4th —-, 2022 WL 17413892 (6th Cir. 2022), is neither a drug nor medical-device case but it underscores the risk posed by offensive non-mutual collateral estoppel. For reasons well stated by the dissenting judge, the case is wrongly decided. Fortunately, the decision’s reach is limited by the majority’s recognition that its result rests on “a unique settlement agreement” that resolved an earlier state-court class action and governed the ensuing federal MDL. 2022 WL 17413892, at *1.
The Supreme Court has held that in diversity cases a district court evaluating the applicability of offensive non-mutual collateral estoppel should generally follow “the law that would be applied by state courts in the State in which the federal diversity court sits.” Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508 (2001). That principle, however, is subject to an important limitation: District courts are not required to apply offensive non-mutual collateral estoppel whenever state law would condone its use. Instead, trial courts have “broad discretion to determine when [the doctrine] should be applied.” Parklane Hosiery Co. v. Shore, 439 U.S. 322, 331 (1979). When exercising that discretion, “a trial judge should not allow the use of offensive collateral estoppel” in cases where its application “would be unfair to a defendant.” Id.
Its protestations to the contrary notwithstanding, the Sixth Circuit’s decision is not faithful to either of these principles.
As the court noted, Ohio courts generally apply issue preclusion when the relevant factual dispute or legal question “was actually and directly litigated in [a] prior action” and “necessarily” decided against the defendant after having had a “full and fair opportunity” to litigate the issue. Abbott, 2022 WL 17413892, at *5 (quotation marks omitted).
The ultimate issue in Abbott was whether the defendant’s use and discharge of a chemical—C-8, or perfluorooctanoic acid (PFOA)—negligently caused the plaintiff’s testicular cancer. As in all toxic-tort cases, the plaintiff had to establish the existence of a duty, its breach, and a causal connection between the breach and the plaintiff’s injury. We deliberately say “establish” rather than “prove” because the district court’s application of offensive non-mutual collateral estoppel meant that the plaintiff did not have to prove the existence of a duty, its breach, or the foreseeability of his injury. The district court held—and the Sixth Circuit affirmed—that the defendant could not contest duty, breach, or foreseeability because juries in three prior trials had concluded that the diseases suffered by the plaintiffs in those cases were the foreseeable consequence of the defendant having breached a duty to act as a reasonably prudent person would “under the circumstances.” Abbott, 2022 WL 17413892, at *7. The district court further held, and the Sixth Circuit also agreed, that the defendant was not only precluded from contesting foreseeability but, given the “unique” settlement agreement resolving the prior class-action that “informs the application of collateral estoppel here,” also precluded from contesting that a particular level of exposure caused the plaintiff’s cancer. Id. at *1, 9.
It is hard to reconcile either holding with the facts and law.
Remember that for offensive non-mutual collateral estoppel to apply, the relevant issue must have been “directly litigated in [a] prior action” and “necessarily” decided against the defendant. Abbott, 2022 WL 17413892, at *5. Here, the prior jury verdicts that purportedly estopped the defendant from disputing duty, breach, and foreseeability were general verdicts finding the defendant negligent. The jury in each case was instructed that the defendant owed a duty of care if “a reasonably prudent person would have foreseen that” the defendant’s conduct “was likely” to cause someone “in [the plaintiff’s] position” injury and that its breach of that duty was a proximate cause of the plaintiff’s injury if the defendant “should have foreseen or reasonably anticipated that injury would result” from the alleged breach. Id. at *7–8.
It boggles the mind that not one but two courts—the Southern District of Ohio and then the Sixth Circuit—found that the general verdicts returned in the prior cases based on those instructions “necessarily … determined” that the defendant was negligent and could have foreseen injury to someone in the Abbott plaintiff’s position. First, only one of the three previous plaintiffs seems to have suffered the same type of cancer as the Abbott plaintiff. Second, only one of the three previous plaintiffs drank from the same contaminated water supply as the Abbott plaintiff. Third, unlike at least two of the three previous plaintiffs, who argued that the defendant should have foreseen their injuries because it was aware that the concentration of PFOA in their respective water supplies exceeded the company’s internal guideline, the Abbott plaintiff conceded that the concentration in his water supply never exceeded the guideline and that the company was unaware of its presence in his water supply until a certain date.
According to the Sixth Circuit, these factual differences were immaterial because the prior, general verdicts rested on jury instructions that, supposedly, “turn[ed] on [the defendant’s] conduct, not the particulars of [the prior plaintiffs’] individual circumstances.” Abbott, 2022 WL 17413892, at *8. Huh?? As recounted above, the jury instructions explicitly defined duty, breach, and foreseeability in terms of conduct vis-à-vis “someone in [the particular plaintiff’s] position.” Id. at 7 (emphasis added). The Sixth Circuit’s analysis does not withstand even minimal scrutiny.
The dissent called the majority out, observing that “the precise issues of duty, breach, and foreseeability raised in Abbott” had “not been actually litigated and forever decided” by the prior trials because they “used general verdict forms and resulted in plaintiff-specific verdicts.” Abbott, 2022 WL 17413892, at *23 (Batchelder, J., dissenting). As the dissent pointed out, the prior trials “involved distinct, plaintiff-specific facts that bear heavily on negligence,” including “each plaintiff’s” proximity to discharge source, “the length and timing of his or her exposure to C-8,” the defendant’s response, “its knowledge about which locations were exposed to C-8 (and at what levels).” Id. at *24. “Each of these factual variations,” the dissent noted, “can affect the duty and foreseeability elements of negligence.” Id. This matters, the dissent said, because “[i]f divergent facts in later cases could lead juries to reach different conclusions, then collateral estoppel is inappropriate.” Id. at *25.
Notably, the dissent did not limit itself a case-specific critique of the majority opinion. Rather, it also challenged the majority’s conclusion that no considerations of fairness beyond those specifically mentioned in Parklane Hosiery limit a district court’s discretion in applying offensive non-mutual collateral estoppel. The dissent argues that, in the context of “mass-tort multidistrict litigation,” due process prohibits a district court from giving preclusive effect to a verdict returned in a bellwether trial unless it determines after proper inquiry that the bellwether case is “reasonably representative” of the case in which collateral estoppel is subsequently sought. Abbott, 2022 WL 17413892, at *18, 23 (Batchelder, J., dissenting).
Absent such inquiry and determination—which is absent in Abbott—offensive non-mutual collateral estoppel is, said the dissent, “fundamentally unfair” to the defendant and a “violation of due process.” Id. We agree.