1

The Honorable David R. Hansen stepped down as Chief Judge of the United

States Court of Appeals for the Eighth Circuit at the close of business on March 31,

2003. He has been succeeded by the Honorable James B. Loken.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

________________

No. 01-3522

________________

Liberty Mutual Insurance

Company,

Appellee,

v.

FAG Bearings Corporation,

Appellant.

*

*

*

*

*

*

*

*

*

Appeal from the United States

District Court for the

Western District of Missouri.

 [PUBLISHED]

________________

Submitted: September 9, 2002

 Filed: July 10, 2003 

________________

Before HANSEN,1

 Chief Judge, LAY and MURPHY, Circuit Judges. 

________________

HANSEN, Circuit Judge.

Liberty Mutual Insurance Company (Liberty), a general liability insurer, filed

a declaratory judgment action seeking a determination that it had no duty to defend

or indemnify one of its policyholders, FAG Bearings Corporation (FAG), in various

class actions and administrative proceedings arising out of environmental
2

The Honorable Ortrie D. Smith, United States District Judge for the Western

District of Missouri.

3

The underlying facts in this case have been detailed in a number of earlier

opinions. See Liberty Mut. Ins. Co. v. FAG Bearings Corp., 153 F.3d 919 (8th Cir.

1998); FAG Bearings Corp. v. Gulf States Paper Co., et al., No. 95-5081 (W.D. Mo.

Sept. 30, 1998); Liberty Mut. Ins. Co. v. FAG Bearings Corp., No. 94-0241 (W.D.

Mo. May 14, 1996); Lewis v. FAG Bearings Corp., 5 S.W.3d 579 (Mo. Ct. App.

1999).

2

contamination at FAG's Joplin, Missouri plant. The district court2 granted Liberty

summary judgment, finding that FAG was precluded from relitigating the relevant

issues regarding coverage because they had been decided in an earlier action between

Liberty and FAG, and alternatively, that the liability insurance policy did not cover

the alleged acts potentially giving rise to FAG's liability in the underlying suits.

Furthermore, the district court concluded that the insurance policy did not create a

duty to defend in administrative proceedings. For the reasons stated below, we

affirm. 

I. BACKGROUND

This is the second time these two parties have appeared in a case before this

court.3

 In 1994, Liberty brought a declaratory judgment action (LM I), seeking to

determine its obligation under a liability policy to defend and indemnify FAG in two

civil actions, Lewis v. FAG Bearings Corp. ("the Lewis action") and Thomas v. FAG

Bearings Corp. (“the Moretz Action”), and two administrative proceedings involving

the EPA and the Missouri Department of Natural Resources (MDNR). The district

court in LM I ("the LM I court") found that recurring malfunctions in FAG’s

trichloroethylene (TCE) reclamation system at its Joplin plant caused airborne

emissions that led to the groundwater contamination, property damage, and bodily

injury giving rise to the underlying actions. See Liberty Mut. Ins. Co. v. FAG

Bearings Corp., No. 94-0241, slip op. at 1-3, 9-10 (W.D. Mo. May 14, 1996). In
4

In 1982, Liberty began insuring FAG through a series of general and excess

liability policies. The policies contain a pollution exclusion clause limiting FAG's

coverage as follows:

This policy does not apply to bodily injury or property damage

arising out of the discharge, dispersal, release or escape of smoke,

vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases,

waste materials or other irritants, contaminants or pollutants into or

upon land, the atmosphere or any water course or body of water; but this

exclusion does not apply if such discharge, dispersal, release or escape

is sudden and accidental.

Id. at 4 (internal quotations omitted).

3

granting Liberty's motion for summary judgment, the LM I court found that these

releases fell within the pollution exclusion clause in FAG's liability insurance policy

because they were not “sudden and accidental.”4

 Id. at 9-10. The LM I court noted

in its summary judgment order and in a subsequent order denying FAG's motion to

alter and amend judgment, that its ruling in the case did not determine the parties'

rights in other pending or future actions. 

FAG filed a Rule 60(b) motion for relief from judgment in LM I on the basis

of “newly discovered evidence,” specifically, expert reports used against it in a

related contribution action (Gulf States) showing that FAG released TCE in a number

of ways other than through airborne emissions. The court in Gulf States, notably the

same court as that in LM I, found that in addition to the faulty vapor recovery system,

FAG lost between 11,000 and 24,000 gallons of TCE through pump malfunctions,

"still bottoms" generated during distillation of TCE, collection tank overflows,

leaking barrels, dumping, incidental use by employees, and seal leaks in the vault.

See FAG Bearings Corp. v. Gulf States Paper Co., et al., No. 95-5081, slip op. at 6-27

(W.D. Mo. Sept. 30, 1998). The LM I court denied FAG’s motion, finding that FAG

had not exercised due diligence in discovering the other sources of release, that the
4

evidence was merely cumulative, and that FAG did not even assert that any of the

new sources of contamination were “sudden and accidental.” 

On appeal, we affirmed the LM I court’s judgment. See 153 F.3d at 922. We

held that FAG had failed to put forward evidence creating a genuine issue of material

fact as to whether there were releases of TCE other than the vapor emissions that

were “sudden and accidental.” Id. We noted that although the complaints in the

underlying suits alleged other methods of release, the undisputed evidence in the

Moretz action related only to vapor releases through the TCE reclamation system, and

FAG failed to put forward evidence to create an issue to the contrary. In affirming

the LM I court’s denial of FAG’s Rule 60(b) motion, we agreed that FAG had failed

to exercise due diligence in discovering the new evidence. Id. at 924.

In 1999, Liberty filed the complaint in this action (LM II), seeking to determine

its obligation to defend and indemnify FAG in two civil actions, the Lewis action and

Black v. FAG Bearings Corp., and the administrative proceeding involving the EPA.

FAG filed a counterclaim, seeking reimbursement for defense costs and

indemnification in these actions as well as the MDNR investigation. At some point

after the complaint was filed, the parties amended their pleadings to add the case of

Hughes v. FAG Bearings Corp. to the list of underlying suits for which FAG was

seeking coverage. 

The Lewis action was filed in 1992 and resulted in a jury verdict of $716,000

in compensatory damages and $1,250,000 in punitive damages. The punitives were

set aside by the trial court. In September 1999, the Missouri Court of Appeals

affirmed the judgment which awarded compensatory damages to Lewis and which

abrogated the jury's award of punitive damages. See Lewis, 5 S.W.3d at 588. The

evidence in Lewis was based almost entirely on FAG’s allegedly improper TCE

storage and disposal practices during the years it utilized TCE in it operations. Id. at

582-83. The Black action was filed in 1996 and settled in 2000 after the discovery
5

of new scientific evidence. The Hughes action was filed in 1999 and is still pending

in Missouri state court. 

The MDNR began its investigation of the Joplin facility in 1992. After

determining that FAG was a "potentially responsible party" for the groundwater

contamination, the MDNR demanded that FAG remediate the contamination and fund

a new public drinking water system. In 1998, FAG entered an Abatement Order on

Consent with the MDNR, requiring FAG to conduct an investigation and remediation

at the Joplin facility. In September 1991, the EPA sent an information request to

FAG regarding the Joplin site. In January 1998, the EPA simultaneously filed a

complaint seeking reimbursement for response and removal costs at the Joplin

facility, and an agreed upon consent decree under which FAG must pay $223,057. 

FAG alleges for the first time in LM II that the contamination giving rise to the

underlying claims resulted when a plumbing contractor working for FAG cut an

underground, abandoned pipeline on FAG’s property in 1983 or 1984. The pipeline

was originally used to transport TCE and was allegedly drained and capped in 1982

when FAG stopped using the chemical. Some months later, FAG directed that the

pipe be cut for use in a new reverse-osmosis system, at which time a clear liquid

flowed from the pipe. The only FAG employee to witness this event believed that the

liquid was water and directed the plumbing contractor to continue his work. Varying

testimony indicates that the liquid continued to flow into the ground for at least thirty

minutes, and for up to two hours after the cut. Later evidence indicated that the liquid

was actually TCE that had remained in the pipe after it was capped in 1982.

According to FAG, the first evidence of the pipeline cut was discovered in

2000 by its adversaries in other litigation. FAG alleges that the concentration of TCE

in the pipeline trench is 10,000 times greater than any other location at its Joplin

facility. Based on the opinions of its experts, FAG asserts that the TCE released from

the pipe cut was the primary, if not the exclusive, source of contamination in the
6

surrounding groundwater, and that its discovery proves that the conclusions of the

LM I court as to the source of contamination were erroneous. FAG argues that the

release from the pipe was “sudden and accidental” and, therefore, covered under the

Liberty policy. 

 

In an order granting partial summary judgment in LM II, the district court

found that the decision in LM I precludes FAG from relitigating the issue of Liberty’s

obligation to defend and indemnify FAG in other actions based on TCE releases. The

court, on its own initiative, also went on to find that even if it was to consider

evidence of the pipe cut as a source of TCE contamination, releases from the cut were

not “sudden and accidental” and, therefore, fall outside the policy’s coverage.

Finally, the court determined that Liberty owes no duty to defend or indemnify FAG

in the administrative proceedings, because they are not "suits" within the coverage

of the insurance policy. FAG appeals the judgment, challenging the district court’s

application of issue preclusion, its finding that releases from the pipe cut were not

“sudden and accidental," and its conclusion that the administrative proceedings are

not "suits."

II. DISCUSSION

In reviewing the district court's grant of summary judgment, we review de novo

its conclusions of law, see Tillery v. Hoffman Enclosures, Inc., 280 F.3d 1192, 1196

(8th Cir. 2002), including the availability of issue preclusion, see Boudreau v. WalMart Stores, Inc., 249 F.3d 715, 719 (8th Cir. 2001) ("A trial court's determination

as to whether the legal prerequisites for issue preclusion have been met on the facts

before it is a mixed question of law and fact, subject to de novo review by this

court."). Therefore, if issue preclusion is unavailable as a matter of law, we owe no

deference to the district court's decision to apply that doctrine. 
7

Liberty argues that we must apply an abuse of discretion standard of review.

We disagree. A number of courts have concluded that although the availability of

issue preclusion is subject to de novo review, because the district court has broad

discretion to determine whether the doctrine should be applied when available,

appellate courts should review this secondary decision for an abuse of discretion. See

United States v. Sandoz Pharms. Corp., 894 F.2d 825, 826 (6th Cir.), cert. denied, 498

U.S. 810 (1990); Plaine v. McCabe, 797 F.2d 713, 718 (9th Cir. 1986). We note that

the cases adopting this abuse of discretion standard generally rely upon Parklane

Hosiery Co. v. Shore, 439 U.S. 322, 331 (1979) (adopting a test of discretion with

respect to nonmutual offensive collateral estoppel only). See, e.g., Berger Transfer

& Storage v. Central States Pension Fund, 85 F.3d 1374, 1376-1377 (8th Cir. 1996);

Setter v. A.H. Robins Co., 748 F.2d 1328, 1330-1331 (8th Cir. 1984); State v.

Daniels, 789 S.W.2d 243, 245 (Mo. Ct. App. 1990). Because mutuality is not lacking

in this case, the equitable considerations requiring deference to the district court's

evaluation of the overall fairness to the litigants in a nonmutual case are not present.

Cf. Balbirer v. Austin, 790 F.2d 1524, 1526 (11th Cir. 1986) ("We note at the outset

that application of collateral estoppel in a particular case is a matter of trial court

discretion, . . . but that this court exercises plenary review over the rules governing

collateral estoppel."). 

A. Issue Preclusion

We look to state law in determining whether to apply issue preclusion. See

Royal Ins. Co. of Am. v. Kirksville Coll. of Osteopathic Med., Inc., 304 F.3d 804,

807 (8th Cir. 2002). "This rule applies [even] when the original judgment is that of

another federal court sitting in diversity." Follette v. Wal-Mart Stores, Inc., 41 F.3d

1234, 1237 (8th Cir. 1994) (citations omitted), cert. denied, 516 U.S. 814 (1995). 

The underlying goal of issue preclusion, also known as collateral estoppel, is

to promote judicial economy and finality in litigation. Thus, "when an issue of
8

ultimate fact has been determined by a valid judgment, it may not again be litigated

between the same parties." King Gen. Contractors v. Reorganized Church of Jesus

Christ of Latter Day Saints, 821 S.W.2d 495, 500 (Mo. 1991) (en banc); see also

Restatement (Second) of Judgments § 27 (1982) ("When an issue of fact or law is

actually litigated and determined by a valid and final judgment, and the determination

is essential to the judgment, the determination is conclusive in a subsequent action

between the parties, whether on the same or a different claim."). Under Missouri law,

we consider three factors in determining whether to apply the doctrine:

(1) whether the issue decided in the prior adjudication was identical to

the issue presented in the present action; (2) whether the prior

adjudication resulted in a judgment on the merits; and (3) whether the

party against whom collateral estoppel is asserted was a party or in

privity with a party to the prior adjudication.

King Gen. Contractors, 821 S.W.2d at 500. Furthermore, only those issues actually

and necessarily decided in the first suit may have preclusive effect in a subsequent

action. See Brown v. Felsen, 442 U.S. 127, 139 n.10 (1979) ("Whereas res judicata

forecloses all that which might have been litigated previously, collateral estoppel

treats as final only those questions actually and necessarily decided in a prior suit.");

Abeles v. Wurdack, 285 S.W.2d 544, 546 (Mo. 1955) ("A judgment between the same

parties on a different cause of action is binding as to the facts actually decided, and

necessarily determined in rendering the judgment. . . .").

At times, courts also apply an additional factor when analyzing collateral

estoppel. See, e.g., Aetna Cas. & Sur. Co. v. Gen. Dynamics Corp., 968 F.2d 707,

711 (8th Cir. 1992) (stating that the fourth factor requires a court to determine

whether the party against whom preclusion is asserted had a "full and fair

opportunity" to litigate the issue); Shahan v. Shahan, 988 S.W.2d 529, 532-33 (Mo.

1999) (en banc) (same). However, the "full and fair opportunity to litigate" factor

was developed to analyze cases where the parties in the first action are not the same
9

as those in the second. See James v. Paul, 49 S.W.3d 678, 684 (Mo. 2001) (en banc)

(describing the "full and fair opportunity to litigate" factor as a "shorthand description

of the analysis required to determine if non-mutual collateral estoppel . . . permits use

of a prior judgment to preclude relitigation of an issue even though the party asserting

collateral estoppel was not a party to the prior case") (emphasis added). Accord

Haberer v. Woodbury County, 188 F.3d 957, 963 (8th Cir. 1999) (applying Iowa law

and refusing to consider the "full and fair opportunity to litigate" factor where the

parties in both actions were the same); Restatement (Second) of Judgments § 28(5)

and cmt. g (1982) (limiting the fairness inquiry in cases with the same parties to

situations involving misconduct by adversaries or other special circumstances). FAG

and Liberty were both parties in LM I, therefore, absent a strong showing to the

contrary, we assume that both had a full and fair opportunity to litigate the relevant

issues. Accord Restatement (Second) of Judgments § 28 cmt. j (1982) (noting that

preclusion can be avoided by a "compelling showing of unfairness"). 

Analyzing these requirements, the district court observed that the only factor

in dispute is the identity of the issues in both cases. In rejecting FAG's attempt to

define the issue in LM I narrowly – whether the airborne releases of TCE prior to

1982 were "sudden and accidental" – the court noted that FAG's tactic of limiting the

evidence presented in LM I did not change the issue that was decided. Instead, the

district court defined the issue in LM I broadly and concluded that it is the identical

issue being litigated in LM II – the character of, and derivatively the insurance

coverage for, FAG's TCE releases. The district court concluded that the decision in

LM I precludes FAG in LM II from presenting any sources of TCE contamination

other than pre-1982 vapor emissions. 

On appeal, FAG argues that issue preclusion should not apply because (1) the

issues in LM I and LM II are not identical; (2) there has been a material change in

circumstances since LM I was decided; and (3) application of the doctrine would be

inequitable. We address each argument in turn. 
5

Liberty Mut. Ins. Co. v. FAG Bearings Corp., No. 94-0241, slip op. at 9 (W.D.

Mo. May 14, 1996) ("Defendant's AMEG vapor recovery system frequently and

repeatedly malfunctioned, releasing large amounts of TCE into the air over a long

period of time. The only evidence presented indicates that this continued to occur as

long as the 'closed loop' system was in operation, that is, from at least 1973 to 1981

or 1982. FAG's employees and its expert opine that these vapors condensed and

returned to the soil on FAG's property, and there is no evidence that FAG released

TCE in any other manner.").

10

First, FAG asserts that the issues in LM I and LM II are not identical and,

therefore, that issue preclusion cannot apply. Defining the issue in the prior litigation

is crucial in determining whether issue preclusion is available. Generally speaking,

the broader a court defines the issue previously litigated, the more likely it is to have

preclusive effect in a subsequent litigation. On the other hand, by defining the issue

narrowly and only in terms of the evidence or arguments actually considered by the

court, litigants may be successful in arguing that the second proceeding involves a

new or distinct issue not decided in the first. Using this tactic, FAG asserts that the

only issue decided in LM I was whether its pre-1982 airborne emissions of TCE were

"sudden and accidental" releases, and that the issue presented in LM II is whether the

pipeline cut was a "sudden and accidental" release.

The court below rejected this narrow definition of the issue in LM I, as do we.

In granting summary judgment to Liberty, the LM I court necessarily decided three

relevant issues. Ultimately, the court determined that Liberty had no obligation to

indemnify or to continue to defend FAG in the Moretz action. In reaching this

conclusion, the LM I court also determined, based on the undisputed evidence, that

the only sources of contamination were pre-1982 airborne emissions of TCE released

through FAG's reclamation system.5

 Next, the LM I court concluded that these pre1982 airborne emissions were not "sudden and accidental" releases and, therefore,

were excluded by the policy. 
11

In LM II, the ultimate issue is whether Liberty has an obligation to indemnify

and defend FAG in a number of other underlying suits arising out of the same

contamination at issue in Moretz. The two subissues in this case are the same as

those in LM I – the identification of the sources of release and whether those releases

were "sudden and accidental." As the district court noted, the fact that FAG now

possesses previously unpresented evidence as to the sources of release does not serve

to change the issues decided in LM I.

FAG argues that this broad definition of the issue in LM I is directly contrary

to the limitations expressed by the LM I court in granting summary judgment. In a

footnote in its May 14, 1996, order, and again in the order denying FAG's motion to

alter and amend judgment, the LM I court stated: 

We make no finding with respect to Liberty's duty to defend FAG in

actions which involve third party defendants, or in actions based upon

facts other than those now before the Court. In addition, with respect to

any pending case in which settlement has not been reached, Liberty is

cautioned that it continues to be obligated to defend FAG against

complainants filing substantially "false or fraudulent" claims. 

Liberty Mut. Ins. Co. v. FAG Bearings Corp., No. 94-0241, slip op. at 14 n.11 (W.D.

Mo. May 14, 1996). FAG asserts that this statement prevents the order from having

any preclusive effect in this litigation. As explained below, we agree with the district

court that "FAG's arguments fail to properly acknowledge the distinctions between

claim preclusion and issue preclusion." Liberty Mut. Ins. Co. v. FAG Bearings Corp.,

No. 99-5017, slip op. at 8 (W.D. Mo. May 21, 2001).

The district court noted that the purpose for the LM I court's statements was to

avoid the effect of claim preclusion in future cases. Id. at 10 ("Despite FAG's postjudgment attempts to expand the scope of his ruling, Judge Stevens' decision was

necessarily limited to the Moretz Action because he did not know what allegations
12

were (or would be) raised in other lawsuits. Not knowing whether a plaintiff might

sue FAG for injuries resulting from the release of a chemical other than TCE (as

intimated by both parties' post-judgment filings), . . . Judge Stevens simply

acknowledged that his judgment could have no claim-preclusive effect over those

cases when he refrained from addressing Liberty Mutual's obligations in suits other

than the Moretz Action."). Although his decision did not necessarily decide the rights

and obligations of the parties as to other pending or future suits, any issues

necessarily determined by Judge Stevens in the resolution of LM I, to the extent that

they are now common to this pending action, cannot be relitigated.

The issue of the source of TCE groundwater contamination at FAG's factory

was actually litigated and necessarily decided in LM I, and, therefore, may not be

relitigated in LM II. In order to determine whether FAG's TCE releases were "sudden

and accidental," the LM I court was required to ascertain the source of those releases.

The LM I court did not simply look to the Moretz record and assume that vapor

emissions were the only source of contamination. FAG consistently argued that the

faulty TCE reclamation system was not the sole source of the contamination giving

rise to the underlying actions, and recognized that a finding to the contrary could

serve to prejudice FAG in future actions. The LM I court and this court both rejected

its repeated attempts to argue this position because FAG's allegations were not

supported by sufficient evidence to raise an issue of material fact as to the existence

of any other source of contamination or any other methods of release. 

Next, FAG argues that even if the issues are the same, there is an exception to

the application of issue preclusion where circumstances have changed since the initial

litigation. According to FAG, the "changed circumstances" exception allows litigants

to avoid issue preclusion where the underlying facts have changed or where new

evidence requiring a different result is discovered. FAG asserts that the recent

discovery of the pipe cut incident qualifies either as a change in events or as newly

discovered evidence and, therefore, prohibits the application of issue preclusion. 
13

FAG argues that the discovery of the pipe cut incident is the same as a change

in the underlying facts. We disagree. The cases cited by FAG all involve situations

where the courts refused to apply collateral estoppel because of events that occurred

or relationships that actually changed between the first and second actions. In this

case, all of the events giving rise to FAG's liability in the underlying suits occurred

before the filing of LM I. Where the first and second actions are both based on an

evaluation of the same historical facts, a litigant seeking to introduce newly

discovered evidence otherwise in existence at the time of the first suit may not argue

that the facts have changed in the timeperiod between the two actions in order to

avoid the preclusive effect of the first decision. The line of cases cited by FAG is

clearly distinguishable. See, e.g., Montana v. United States, 440 U.S. 147, 159 (1979)

(noting that "changes in facts essential to a judgment will render collateral estoppel

inapplicable" and citing as examples cases dealing with alteration of alimony in light

of remarriage by former wife, reevaluation of amount of condemnation award in

subsequent condemnation actions where effect of short-term government option is

dependent on changing economic conditions, and reevaluation of taxpayer status in

subsequent tax years); Farrow v. Brown, 873 S.W.2d 918, 920 (Mo. Ct. App. 1994)

(refusing to apply preclusion in action for private road where issue of necessity had

been decided 24 years earlier and physical changes to the land had occurred in the

meantime). 

FAG also argues that because Restatement (Second) of Judgments § 29 cmt.

j (1982) suggests that there should be no preclusion where "new evidence has become

available that could likely lead to a different result," it should not be precluded from

introducing evidence of the pipe cut in LM II. FAG relies upon its earlier failures to

present evidence of the pipe cut to argue that coverage for damages arising out of that

incident was not "actually litigated." Liberty argues that because FAG had an

opportunity to present evidence of the other types of release in LM I and failed to do

so, it is precluded from attempting to present that additional evidence now. The court

below adopted this same reasoning, concluding that "FAG's tact in limiting the
14

evidence presented to Judge Stevens did not change the issue that was before him .

. . . It was incumbent upon FAG to present favorable evidence demonstrating the

character of those releases brought them with[in] the policy's coverage." Liberty Mut.

Ins. Co. v. FAG Bearings Corp., No. 99-5017, slip op. at 11, 12 (W.D. Mo. May 21,

2001) ("[I]ssues that are litigated are not necessarily co-extensive with the evidence

presented."). We agree that at the time FAG argued in LM I that there were multiple

potential sources of TCE contamination, it had the opportunity, but failed to produce

any evidence to substantiate these allegations. Accord In re Kelly, 238 B.R. 156, 161

(Bankr. E.D. Mo. 1999) ("The issue is not whether the party to the prior proceeding

offered all of the evidence it proposed to offer, but whether the party had an

opportunity to do so.") (citing Buckley v. Buckley, 889 S.W.2d 175, 178 (Mo. Ct.

App. 1994)). 

Liberty also notes that § 29 of the Restatement is applicable only to cases

involving different parties, and that the relevant provisions of the Restatement define

"issue litigated" broadly enough to preclude bringing forth in a later proceeding new

evidence or new legal theories that might have been raised in the prior adjudication

of the issue. We agree. See Restatement (Second) of Judgments § 27, cmts. c, e

(1982). Comment c states that "if the party against whom preclusion is sought did in

fact litigate an issue of ultimate fact and suffered an adverse determination, new

evidentiary facts may not be brought forward to obtain a different determination of

that ultimate fact." Id. cmt. c. The following illustration extrapolates on this view:

A brings an action against B to recover for personal injuries in an

automobile accident. A seeks to establish that B was negligent in driving

at an excessive rate of speed. After trial, verdict and judgment are given

for B. In a subsequent action by B against A for injuries in the same

accident, A is precluded from setting up B's negligence as a defense,

whether or not the alleged negligence is based on an assertion of

excessive speed. It is reasonable to require A to bring forward all

evidence in support of the alleged negligence in the initial proceeding.
15

Id. illus. 4. In order to decide the ultimate issue in LM I, the district court was

required to determine first, how FAG released TCE, and second, whether that method

of release was "sudden and accidental." The LM I court concluded, and we agreed

on appeal, that the only method of release supported by the undisputed evidence was

the release via vapor emissions. Under the analysis in the example above, any

evidence or theories asserting a different factual basis for how the TCE was released

should have been presented in LM I. 

 

There is a significant line of cases suggesting that litigation of an issue

necessarily encompasses all arguments and evidence that could be presented to

resolve the issue, and that the mere discovery of new evidence does not create a new

issue. These cases indicate that litigants may not have a second opportunity to prove

a fact or make an argument relating to an issue previously decided. See, e.g., Yamaha

Corp. of Am. v. United States, 961 F.2d 245, 254 (D.C. Cir. 1992) ("[O]nce an issue

is raised and determined, it is the entire issue that is precluded, not just the particular

arguments raised in support of it in the first case."), cert. denied, 506 U.S. 1078

(1993); Sec. Indus. Ass'n v. Bd. of Governors, 900 F.2d 360, 364 (D.C. Cir. 1990)

(noting that the plaintiff may not raise a new argument in a second proceeding if it

could have been made in the first); Pignons S.A. de Mecanique v. Polaroid Corp., 701

F.2d 1, 2-3 (1st Cir. 1983) (commenting on a party's attempt to offer new theories,

evidence, and arguments in a second litigation, the court noted that "[i]t is just this

type of argument, however, that collateral estoppel bars [the plaintiff] from making.

[The plaintiff] had a fair opportunity to make these arguments and to introduce this

evidence the first time. The law requires the court to offer [the plaintiff] nothing

more. . . . Once a plaintiff has had a chance to prove a fact, he cannot reopen the

matter simply by stating that he wishes to introduce more or better evidence."

(internal quotations omitted)); Jones v. United States, 466 F.2d 131, 136 (10th Cir.

1972) ("Evidence of this type is not the result of a different factual situation or

changed circumstances. It is, instead, historical in nature and could have been

admitted at the first trial if properly submitted. If the taxpayers' case was not
16

effectively presented at the first trial it was their fault; affording them a second

opportunity in which to litigate the matter, with the benefit of hindsight, would

contravene the very principles upon which collateral estoppel is based and should not

be allowed."), cert. denied, 409 U.S. 1125 (1973). 

In situations where the same parties are involved, the rationale behind these

cases makes no exception for prior decisions that were wrongly decided because of

insufficient or unavailable evidence. While we recognize that Missouri courts have

not clearly indicated how to resolve the fairness and accuracy versus efficiency and

finality conundrum, most courts require more to avoid issue preclusion than simply

an assertion that the previous decision was wrong. See, e.g., Brown, 442 U.S. at 132

(recognizing that by promoting repose and stability in judgments, collateral estoppel

often "blockades unexplored paths that may lead to truth"); SEC v. Monarch Funding

Corp., 192 F.3d 295, 303-04 (2d Cir. 1999) (noting that the virtues of issue preclusion

do not come without a price: "Just as occasionally 'the race is not to the swift, nor the

battle to the strong . . . but time and chance happeneth to them all,' Ecclesiastes 9:11

(King James ed.), so too the results of an earlier resolution of an issue may simply be

wrong."); Johnson v. Watkins, 101 F.3d 792, 795 (2d Cir. 1996) (recognizing that the

doctrine of collateral estoppel "represents an informed choice that the occasional

permanent encapsulation of a wrong result is a price worth paying to promote the

worthy goals of ending disputes and avoiding repetitive litigation"); James Talcott,

Inc. v. Allahabad Bank, Ltd., 444 F.2d 451, 463 (5th Cir.) ("To be sure, we recognize

that whenever a court considers applying the doctrine of collateral estoppel, there is

always a lingering question whether the party might have succeeded in proving his

point if he had only been given a second chance at producing evidence. Without

more, however, this question is not sufficient to outweigh the extremely important

policy underlying the doctrine of collateral estoppel – that litigation of issues at some

point must come to an end."), cert. denied, 404 U.S. 940 (1971); Bailey v. DiMario,

925 F. Supp. 801, 810 (D.D.C. 1995) (noting that the "application of the doctrine of

collateral estoppel represents a decision that the needs of judicial finality and
17

efficiency outweigh the possible gains of fairness or accuracy from continued

litigation [of an issue] that previously has been considered by a competent tribunal")

(internal quotations and citations omitted); Restatement (Second) of Judgments § 28

cmt. j (1982) ("Such a refusal to give the first judgment preclusive effect should not

. . . be based simply on a conclusion that the first determination was patently

erroneous."). But see Rogers v. Ford Motor Co., 925 F. Supp. 1413, 1419 (N.D. Ind.

1996) (stating that "[c]onfidence in the correctness of [an] earlier determination is

fundamental to the principles of collateral estoppel"). 

FAG responds to this argument by asserting that it did not have a full and fair

opportunity to litigate the issue because the evidence of the pipe cut and the reports

analyzing its effects were not available before the decision in LM I. Accord Miller

v. Miller, 956 P.2d 887, 898 (Okla. 1998) (noting that "the availability of new

evidence can be considered in determining whether a litigant has had a full and fair

opportunity to litigate an issue in a prior action for purposes of applying preclusion

doctrine"). Liberty asserts that FAG may not invoke a fairness analysis where the

failure to present the "new" evidence in LM I was completely attributable to FAG's

lack of diligence. Indeed, the cases cited by FAG adopting § 29 of the Restatement

all involved situations where the relevant evidence had been absent from the prior

litigation by no fault of the litigant against whom preclusion was sought. See, e.g.,

Jack Faucett Assocs. v. AT&T Co., 744 F.2d 118, 128-29 (D.C. Cir. 1984) (refusing

to apply collateral estoppel where evidence tending to require a different result was

excluded in the first action by erroneous evidentiary rulings by the court), cert.

denied, 469 U.S. 1196 (1985); Rye v. United States Steel Mining Co., 856 F. Supp.

274, 278-79 (E.D. Va. 1994) (refusing to apply collateral estoppel where key witness

disappeared before first trial and court made other erroneous evidentiary rulings);

Mocci v. Carr Eng'g Assocs., 703 A.2d 686, 688-89 (N.J. Super. Ct. App. Div. 1997)

(refusing to apply collateral estoppel where testimony by expert witness in original

suit who had surveyed the wrong piece of land led to an erroneous decision); see also

In re Ga. Granite Co., 86 B.R. 733, 739 (Bankr. N.D. Ga. 1988) ("Newly discovered
18

evidence may preclude application of the collateral estoppel doctrine if the party

against whom collateral estoppel is asserted was deprived of crucial evidence in the

prior litigation without fault of his own.") (citing Butler v. Stover Bros. Trucking Co.,

546 F.2d 544 (7th Cir. 1977)). 

FAG argues that due diligence is irrelevant to the introduction of new evidence.

Recognizing that the issue is not whether the prior decision should be set aside, but

whether it should preclude relitigation of the same or similar issues in a subsequent

case, Restatement § 29 specifically states that a lack of due diligence should not

prevent a party from presenting the new evidence. See Restatement (Second) of

Judgments § 29 cmt. j (1982); see also Barker v. Brinegar, 788 A.2d 834, 840 (N.J.

Super. Ct. App. Div. 2002) ("[T]he judge may consider diligence, or lack of diligence,

. . . [but] a lack of diligence does not require invocation of collateral estoppel

particularly where, as here, plaintiff attempted to obtain Dr. Matthew's evaluation

prior to the arbitration proceeding."). But see Klein v. Comm'r, 880 F.2d 260, 263

(10th Cir. 1989) ("A party may not assert a change in controlling facts when the facts

allegedly showing a change in circumstances could have been discovered in the

exercise of due diligence."); Calcutt v. Comm'r, 91 T.C. 14, 25 (1988) (holding that

"evidence which, by due diligence, could have been produced in the first proceeding

is considered to have been available at the first proceeding" and, therefore, will not

preclude the application of collateral estoppel). Having concluded that the fairness

requirements embodied in Restatement § 29 apply only in cases involving nonmutual

estoppel, we are not persuaded by FAG's reliance on § 29. In light of persuasive case

law and other relevant Restatement sections indicating that discovery of new

evidence cannot prevent the application of issue preclusion, we do not believe that

the Missouri courts would conclude that the dilatory discovery of the pipe cut ordered

by FAG and observed when it was done by one of FAG's employees is sufficient for

FAG to avoid the preclusive effect of the district court's findings in LM I. 
6

Although no court has specifically considered whether FAG exercised due

diligence in discovering the pipe cut incident, the LM I court did find that FAG failed

to exercise due diligence in discovering other sources of release, and denied its 60(b)

motion for relief from judgment on this basis. Furthermore, in the related Gulf States

litigation, the same district court noted that FAG had been consistently apathetic and

evasive in researching the causes of the contamination and in conducting groundwater

and soil testing.

19

Even if we were to determine that Missouri courts would consider new

evidence in determining the ultimate fairness of applying issue preclusion, we

conclude that because Restatement § 29 and extensive fairness inquiries are relevant

primarily in cases involving nonmutual issue preclusion, some degree of diligence

must be shown to avoid the application of issue preclusion on a "new evidence"

theory where the parties in both actions are the same and there is no allegation that

another party's actions prevented the introduction of the evidence by the estopped

party in the initial litigation.6

 In all but a few of the cases that we have found

allowing the introduction of new evidence, that evidence was absent from the original

proceeding by no fault of the party subject to preclusion. The unfairness in these

cases occurred not because of the fact that material evidence was not presented, but

because of the way in which it was kept out. 

We do not believe that Missouri would extend this fairness consideration to

every party who claims to have new evidence. This would eviscerate the doctrine of

issue preclusion. Where the party sought to be precluded has completely failed to

discover and present material evidence that was reasonably available, by no fault of

any other party or insufficient court procedure, it is not unfair to bind them to the

prior decision, despite the existence of evidence that may have changed the result. 

We find no merit in FAG's other fairness-based arguments against issue

preclusion. Indeed, we believe it would be unfair to allow FAG to receive the benefit

of defense and indemnification from Liberty on the basis of the newly-discovered
20

pipe cut theory where FAG's adversaries in the underlying suits secured verdicts or

settlement agreements without evidence of the pipe cut incident and on the basis of

FAG's other methods of pollution alone. The court below correctly applied the

doctrine of issue preclusion in this case. FAG is precluded from relitigating the cause

of contamination or the sources of pollution in LM II. The judgment of the district

court is affirmed.

B. Application of the Pollution Exclusion Clause

Having determined that FAG is precluded from asserting that the cause of TCE

contamination was the pipe cut incident, we refrain from deciding whether that

incident, standing alone, would qualify as a "sudden and accidental" release.

Although we may disagree with the district court's legal analysis of the issue, because

we affirm on other grounds, a further discussion by this court is unnecessary to the

resolution of this appeal.

C. The Administrative Proceedings

FAG's insurance policy declares that Liberty has a duty to defend "any suit

against the insured seeking damages." Liberty asserts that it does not, and never did,

owe an obligation to FAG to defend against agency action in administrative

proceedings because those proceedings are not "suits." FAG disputes this assertion,

claiming that the relevant Eighth Circuit opinion, Gen. Dynamics Corp., 968 F.2d at

713-14 (holding that agency demand letters are not "suits"), is no longer viable

because it relies on a case that was subsequently abrogated. We disagree and adopt

and affirm the well-reasoned opinion of the district court on this issue. See 8th Cir.

R. 47B. 
21

III. Conclusion

For the foregoing reasons, we affirm the district court's grant of summary

judgment. 

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.