Friday, December 21, 2012

CAFC on collateral estoppel from a stipulated judgment

In addition to the Disney / Pooh case, the CAFC tackled collateral estoppel in Reese v. Verizon California , and again came up with a 2-1 vote.

The issue related to estoppel arising from a stipulation:

We have previously held that issue preclusion or collateral estoppel may indeed arise by reason of stipulated judgment or consent decree, under which the primary consideration is the intent of the parties with respect to its preclusive effect. Hartley v. Mentor Corp., 869 F.2d 1469, 1471 (Fed. Cir. 1989) (applying Ninth Circuit law to an appeal from C.D. Cal.). In Yachts America, Inc. v. United States, 673 F.2d 356, 361 (Ct. Cl. 1982), one of our predecessor courts also held that broad, far-reaching preclusive language in a consent decree terminating a prior litigation and dismissing with prejudice “all other issues” constituted a final judgment on an issue not specifically addressed in the agreement, and therefore that the doctrine of collateral estoppel precluded relitiga- tion of that issue.

Subsequently, and contrary to Reese’s interpretation, the Supreme Court in Arizona also indicated that settle- ments may occasion collateral estoppel when it is clear that the parties intended their agreement to have such an effect. Arizona, 530 U.S. at 414. Indeed, the Court con- cluded that collateral estoppel did not apply in that case because the consent judgment in the first action was “ambiguous as between mutually exclusive theories of recovery” and therefore “too opaque to serve as a founda- tion for issue preclusion.” Id. at 417–18. However, that is not the case before us.


Finally, having determined that collateral estoppel was applicable, the district court did not abuse its discretion in applying collateral estoppel. The Ninth Circuit has held that a motion to dismiss may be supported by collateral estoppel, particularly when the parties have negotiated a consent judgment or settlement agreement to have preclusive effect. Skilstaf, 669 F.3d at 1021–25; Reyn’s Pasta, 442 F.3d at 745–47. All the required ele- ments having been met, fairness does not weigh against the application of collateral estoppel in this case. In re Freeman, 30 F.3d 1459, 1467 (Fed. Cir. 1994).

Judge Moore dissented.

The majority concludes that the language of a stipula- tion in an earlier case (Reese I) against different parties collaterally estops Mr. Reese from bringing his suit. I am perplexed by the majority’s claim that the “extent and scope of the Stipulation are specific and unambiguous.” Maj. Op. at 7. With all due respect, I find that the Stipu- lation unambiguously supports the opposite view—namely that the parties intended that collateral estoppel would attach to the claims for which final judgment of noninfringement on the merits was admitted, but not the claims that were dismissed without decision. At a mini- mum, the Stipulation is ambiguous, and if it is ambiguous, under governing Ninth Circuit law, collateral estoppel does not apply.

The Stipulation distinguishes between claims 1, 7, 13, 18, 25, and 36 of the ’150 patent which the parties stipu- lated to final judgment of noninfringement, and claims 23 and 32 of the ’150 patent which the parties stipulated to dismissal only, not final judgment on the merits. Walking through the Stipulation, the distinctions are clear. To begin, the Stipulation is titled, “Stipulation and Joint Motion for Dismissal and Final Judgment”—two separate things. The first sentence of the Stipulation explains that the parties move for “entry of final judgment of non- infringement by Defendants of certain asserted claims and for dismissal of the remaining asserted claims.” J.A. 157.


If there was ambiguity in paragraph 4 with regard to which claims collateral estoppel attaches, we cannot affirm. Ninth Circuit law is clear that for a stipulated judgment to give rise to claim preclusion, the language of the Stipulation must unambiguously evince the parties’ intent for it to have that effect. See Foster v. Hallco Mfg. Co., 947 F.2d 469, 481 (Fed. Cir. 1991) (applying Ninth Circuit law that courts should avoid “speculat[ing] as to the intent of the parties based on broad, general and ambiguous language”); Sekaquapetwa v. MacDonald, 575 F.2d 239, 246 (9th Cir. 1978) (holding that the default rule is that “an issue is not deemed to be actually litigated if it is the subject of a stipulation between parties”) (in- ternal quotation mark omitted); see also Arizona v. Cali- fornia, 530 U.S. 392, 414 (2000).

The ending of Judge Moore's dissent is direct:

Finally, I do not understand why the majority places the burden on Mr. Reese “to show that the parties . . . did not intend for their stipulated judgment to have any preclusive effect on the issue of infringement.” Maj. Opp. at 8. Ninth Circuit law makes clear that “[t]he party asserting preclusion bears the burden of showing with clarity and certainty what was determined by the prior judgment.” Hydraunautics v. Filmtec Corp., 204 F.3d 880, 885 (9th Cir. 2000) (quoting Offshore Sportswear, Inc. v. Vuarnet Int’l, B.V., 114 F.3d 848, 850 (9th Cir. 1997)). The majority’s burden-shifting is especially odd given that we must construe all factual allegations in the complaint in the light most favorable to the nonmoving party, Mr. Reese. See Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1014 (9th Cir. 2012).

The Stipulation is clear. The judgment is clear. The parties intended collateral estoppel to apply to the claims upon which judgment of noninfringement was entered, not the dismissed claims. The district court thus erred by dismissing Mr. Reese’s complaint, and I would reverse.


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