Opinion ID: 3009926
Heading Depth: 3
Heading Rank: 3

Heading: Fairness Considerations

Text: The Supreme Court has granted district courts broad discretion to determine when a plaintiff who has met the requisites for the application of collateral estoppel may employ that doctrine offensively. See Park Lane Hosiery Co. v. Shore, 439 U.S. 322 (1979). In an attempt to provide general guidance as to the exercise of that discretion, the Court explained that: If a defendant in the first action is sued for small or nominal damages, he [or she] may have little incentive to defend vigorously, particularly if future suits are not foreseeable. Allowing offensive collateral estoppel may also be unfair to a defendant if the judgment relied upon as a basis for the estoppel is itself inconsistent with one or more previous judgments in favor of the defendant. Still another situation where it might be unfair to apply offensive estoppel is where a second action affords the defendant procedural opportunities unavailable in the first action that could readily cause a different result . . . . The general rule should be that in cases where a plaintiff could easily have joined in the earlier action or where, either for the reasons discussed above or for other reasons, the application of offensive estoppel would be unfair to a defendant, a trial judge should not allow the use of offensive collateral estoppel. Id. at 330-31 (citations and footnotes omitted). A finding of fairness to the defendant is thus a necessary premise to the application of offensive collateral estoppel.8 In arguing that it would be unfairly penalized if collaterally estopped from relitigating the successor liability issue, Raytech places principal reliance, again, upon its argument that critical facts have changed.9 As should be clear from our prior discussion, we do not agree that facts essential to the Schmoll decision have changed. But it is also beyond debate that certain facts have changed. In the aftermath of the Schmoll decision, for instance, Raytech has paid over to Raymark considerable additional sums of money.10 The question is, do the 8 . This notion of fairness reflects the equitable nature of issue preclusion generally. See Jack Faucett Associates v. American Tel. & Tel., 744 F.2d 118, 125 (D.C. Cir. 1984). The Court of Appeals for the Fifth Circuit has commented that offensive collateral estoppel is even a cut above [collateral estoppel] in the scale of equitable values. Nathans v. Sun Oil Co. (Delaware), 705 F.2d 742, 744 (5th Cir. 1983). 9 . Most of the other points Raytech makes in support of its fairness argument are, in actuality, attempts by Raytech to challenge the Schmoll opinion on the merits. As for Raytech's argument that it could not have foreseen the import of the Schmoll case at the time the case was litigated, we agree with the district court that the record only serves to belie this position and suggests instead that Raytech was well aware of the stakes involved in Schmoll. The Schmoll court itself observed that the parties submitted thousands of pages of documents and deposition transcripts for its consideration regarding the successor liability issue. See Schmoll, 703 F. Supp. at 869. 10 . According to Raytech, Raytech has paid Raymark over $63 million to date for the sale of RIPG and Wet Clutch & Brake. While we do not know how much of this money Raytech has paid since the handing down of the Schmoll decision, we think it safe to conjecture that Raytech has paid over to Raymark several tens of millions of dollars since Schmoll was decided. factual changes that have occurred render the application of collateral estoppel unfair to Raytech? We do not think so. In the wake of Schmoll, Raytech has had every incentive to act in a manner so as to fortify its argument that it should not be collaterally estopped from relitigating the issue of its successor liability. Moreover, equitable appearances have, no doubt, been shaded to Raytech's advantage as a result of its continued payments on the unsecured notes. However, while we fully understand that it would be unfortunate from Raytech's perspective were the district court's application of collateral estoppel allowed to stand, we fail to see how such an eventuality might be deemed unfair to Raytech as that term is utilized in Park Lane Hosiery. We have already concluded that the Schmoll court would reach the same result were it now presented with the issue of Raytech's successor liability, changes in facts notwithstanding. The necessary implication of this conclusion is that Raytech will suffer absolutely no unfairness should the district court's application of collateral estoppel stand.