Parklane Hosiery Co., Inc. v. Shore
439 U.S. 322 (1979)

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U.S. Supreme Court

Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322 (1979)

Parklane Hosiery Co., Inc. v. Shore

No. 77-1305

Argued October 30, 1978

Decided January 9, 1979

439 U.S. 322

Syllabus

Respondent brought this stockholder's class action in the District Court for damages and other relief against petitioners, a corporation, its officers, directors, and stockholders, who allegedly had issued a materially false and misleading proxy statement in violation of the federal securities laws and Securities and Exchange Commission (SEC) regulations. Before the action came to trial, the SEC sued the same defendants in the District Court alleging that the proxy statement was materially false and misleading in essentially the same respects as respondent had claimed. The District Court, after a nonjury trial, entered a declaratory judgment for the SEC, and the Court of Appeals affirmed. Respondent in this case then moved for partial summary judgment against petitioners, asserting that they were collaterally estopped from relitigating the issues that had been resolved against them in the SEC suit. The District Court denied the motion on the ground that such an application of collateral estoppel would deny petitioners their Seventh Amendment right to a jury trial. The Court of Appeals reversed.

Held:

1. Petitioners, who had a "full and fair" opportunity to litigate their claims in the SEC action, are collaterally estopped from relitigating the question of whether the proxy statement was materially false and misleading. Pp. 439 U. S. 326-333.

(a) The mutuality doctrine, under which neither party could use a prior judgment against the other unless both parties were bound by the same judgment, no longer applies. See Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U. S. 313. Pp. 402 U. S. 326-328.

(b) The offensive use of collateral estoppel (when, as here, the plaintiff seeks to foreclose the defendant from litigating an issue that the defendant has previously litigated unsuccessfully in an action with another party) does not promote judicial economy in the same manner that is promoted by defensive use (when a defendant seeks to prevent a plaintiff from asserting a claim that the plaintiff has previously litigated and lost against another defendant), and such offensive use may also be unfair to a defendant in various ways. Therefore, the general rule should be that, in cases where a plaintiff could easily have joined in the

Page 439 U. S. 323

earlier action, or where the application of offensive estoppel would be unfair to a defendant, a trial judge, in the exercise of his discretion, should not allow the use of offensive collateral estoppel. Pp. 439 U. S. 329-331.

(c) In this case, however, the application of offensive collateral estoppel will not reward a private plaintiff who could have joined in the previous action, since the respondent probably could not have joined in the injunctive action brought by the SEC. Nor is there any unfairness to petitioners in such application here, since petitioners had every incentive fully and vigorously to litigate the SEC suit; the judgment in the SEC action was not inconsistent with any prior decision; and in the respondent's action there will be no procedural opportunities available to the petitioners that were unavailable in the SEC action of a kind that might be likely to cause a different result. Pp. 439 U. S. 331-333.

2. The use of collateral estoppel in this case would not violate petitioners' Seventh Amendment right to a jury trial. Pp. 439 U. S. 333-337.

(a) An equitable determination can have collateral estoppel effect in a subsequent legal action without violating the Seventh Amendment. Katchen v. Landy, 382 U. S. 323. Pp. 439 U. S. 333-335.

(b) Petitioners' contention that, since the scope of the Seventh Amendment must be determined by reference to the common law as it existed in 1791, at which time collateral estoppel was permitted only where there was mutuality of parties, is without merit, for many procedural devices developed since 1791 that have diminished the civil jury's historic domain have been found not to violate the Seventh Amendment. See, e.g., Galloway v. United States, 319 U. S. 372, 319 U. S. 388-393. Pp. 439 U. S. 335-337.

565 F.2d 815, affirmed.

STEWART, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, WHITE, MARSHALL, BLACKMUN, POWELL, and STEVENS, JJ., joined. REHNQUIST, J., filed a dissenting opinion, post, p. 439 U. S. 337.

Page 439 U. S. 324

Primary Holding
A party may be estopped from relitigating an issue before a jury when it was subject to an adverse judgment against it in an earlier action where it had a full and fair opportunity to litigate its claim, even if the first action is equitable and the second action is legal.
Facts
Shore brought a class action on behalf of Parklane stockholders against Parklane on the grounds that it had issued a false and misleading proxy statement regarding its merger. The SEC previously brought an action against Parklane, in which the court held for the SEC and granted injunctive relief. In that action, the court ruled that the same proxy that gave rise to the claim in the class action was in fact false and misleading. Shore sought partial summary judgment on the issue of the proxy's falseness, applying the doctrine of collateral estoppel. However, the trial court denied this motion because it found that applying estoppel would infringe on Parklane's Seventh Amendment right to a jury. The appellate court ruled that issues could not be presented to a jury at trial if they had been fully and fairly adjudicated in an earlier action, so collateral estoppel should apply.

Opinions

Majority

  • Potter Stewart (Author)
  • Warren Earl Burger
  • William Joseph Brennan, Jr.
  • Byron Raymond White
  • Thurgood Marshall
  • Harry Andrew Blackmun
  • Lewis Franklin Powell, Jr.
  • John Paul Stevens

Collateral estoppel on behalf of a plaintiff should not be permitted when the plaintiff could have joined in the earlier action or it would be generally unfair to a defendant. It is not unfair here because the previous action resolved a factual issue that is identical to an issue in the class action. The jury does not need to make factual findings on this issue, so the Seventh Amendment is not violated. The historical requirement of mutuality of parties was in effect when the Seventh Amendment was created, and it no longer exists, but this is not a sufficient difference to find that collateral estoppel should not be applied.

Dissent

  • William Hubbs Rehnquist (Author)

The removal of the mutuality of parties requirement makes the collateral estoppel doctrine broader. Failing to continue to apply it in this situation infringes on the power of the jury under the Seventh Amendment. Moreover, it is unfair to apply the doctrine to a defendant that has not had the opportunity to have factual findings made by a jury, which plausibly might reach a different conclusion from a judge.

Case Commentary

Mutuality generally requires the same parties to assert preclusion, but this rule extends to parties in privity with those involved in the earlier action. Whether it was the prevailing party or the non-prevailing party is immaterial.

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