Opinion ID: 6516
Heading Depth: 1
Heading Rank: 3

Heading: blue streak's claim of res judicata

Text: Regarding the first requirement, Blue Streak argues that it did not have to be a party (or in privity with a party) to the 1985 action. Instead, Blue Streak argues that only the party against whom the plea of res judicata is asserted (in this case Gulf Island) must be a party to the prior action. Contrary to Blue Streak's assertion, both parties must be identical to or in privity with the parties in the prior suit for res judicata to apply. In support of the proposition that it did not have to be a party to or in privity with a party to the prior action, Blue Streak cites Blonder-Tongue Lab., Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971). 5 Blue Streak's reliance on Blonder-Tongue is misplaced. In BlonderTongue, the Supreme Court eliminated the requirement of mutuality in applying collateral estoppel to bar relitigation of issues decided earlier in federal-court suits. Allen v. McCurry, 449 U.S. 90, 94-95, 101 S.Ct. 411, 415, 66 L.Ed.2d 308 (1980) (emphasis added). As this Court has recognized, the doctrine of res judicata, in its broadest sense, encompasses two distinct preclusion concepts, claim preclusion (res judicata) and issue preclusion (collateral estoppel). United States v. Shanbaum, 10 F.3d at 310. Unfortunately, the terminology used in this area of the law often breeds confusion. Id. Thus, although the BlonderTongue opinion recites the term res judicata, it apparently is using it in its broad sense. As the Supreme Court stated in Allen v. McCurry, supra, it was the mutuality requirement in the context of collateral estoppel that was eliminated. Recently, in Russell v. SunAmerica Securities, Inc., 962 F.2d at 1172-76, this Court addressed the question whether res judicata should have barred the suit against a defendant-appellee that had not been a party to the prior suit. Addressing the identity of parties requirement of res judicata, this Court explained that [a] non-party defendant can assert res judicata so long as it is in privity' with the named defendant. Id. at 1173. Blue Streak thus cannot dispense with the requirement that the parties must be identical in the two suits. Id. at 1172. Gulf Island argues that neither Blue Streak nor Underwriters was ever a party to the prior 1985 suit. Gulf Island admits that 6 Blue Streak/Gulf Island was named in the Hope action that was later consolidated with Gulf Island's 1985 action. However, it is undisputed that Blue Streak/Gulf Island was neither served nor appeared in the 1985 suit. This Court has explained that parties' for purposes of res judicata does not mean formal, paper parties only, but also includes parties in interest, that is, that persons whose interests are properly placed before the court by someone with standing to represent them are bound by the matters determined in the proceeding. Latham v. Wells Fargo Bank, N.A., 896 F.2d 979, 983 (5th Cir.1990) (emphasis in original) (internal quotation marks and citations omitted). Therefore, assuming arguendo that Blue Streak is in privity with the named but unserved defendant (Blue Streak/Gulf Island) in the prior 1985 suit, because that entity never was properly before the court in the prior suit, the identity of parties requirement has not been satisfied. Alternatively, Blue Streak argues that it was in privity with Wausau, the insurer that Gulf Island sued in the 1985 suit. A non-party ... is adequately represented where a party in the prior suit is so closely aligned to her interests as to be her virtual representative. [citations omitted] This requires more than a showing of parallel interests—it is not enough that the non-party may be interested in the same questions or proving the same facts. Eubanks v. F.D.I.C., 977 F.2d 166, 170 (5th Cir.1992) (citation omitted). Gulf Island sued Wausau in the 1985 action not as a third party complaining of the negligence of Blue Streak, but rather as a named insured under its Wausau policy. Although 7 Wausau's interest in certain respects may have been parallel to Blue Streak's in the prior suit, Wausau was not standing in the shoes of Blue Streak, and its interests were not aligned with those of Blue Streak as they conceivably would be in a third-party action.5 Rather, Wausau was protecting itself in a hull and machinery insurance policy coverage dispute with one of its own insureds. Consequently, the district court erred in finding that Blue Streak satisfied the identity of parties requirement of res judicata. Because Blue Streak does not meet the first requirement of res judicata, it is unnecessary to review the arguments presented by the parties as to the other requirements of res judicata.