Opinion ID: 779794
Heading Depth: 2
Heading Rank: 2

Heading: The Preclusive Effect of the Prior Actions

Text: 30 Determining the preclusive effect of the Prior Actions requires an analysis of the common law doctrines of res judicata and collateral estoppel. These related but distinct doctrines operate to prevent parties from contesting matters that they have had a full and fair opportunity to litigate, thereby conserving judicial resources and protecting parties from the expense and vexation of multiple lawsuits. See, e.g., Montana v. United States, 440 U.S. 147, 153-54, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979). 31 We apply federal law in determining the preclusive effect of a federal judgment, PRC Harris, Inc. v. Boeing Co., 700 F.2d 894, 896 n. 1 (2d Cir.1983), and New York law in determining the preclusive effect of a New York State court judgment, Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984); see also 28 U.S.C. § 1738 (implementing the Full Faith and Credit Clause of the United States Constitution). The parties agree that there is no discernible difference between federal and New York law concerning res judicata and collateral estoppel. See, e.g., Pike v. Freeman, 266 F.3d 78, 90 n. 14 (2d Cir.2001). Therefore, we see no need to undertake a separate analysis of the preclusive effect of the Federal and State Actions. 32 On this appeal, Marvel contends that there is no meaningful distinction between the authorship issue raised in the Prior Actions and the termination right at issue in this case. Therefore, according to Marvel, res judicata bars Simon from asserting that he is the author of the Works in order to exercise his termination right under § 304(c). In contrast, Simon argues that the district court was correct in finding that neither res judicata nor collateral estoppel barred him from asserting that he was the Works' author because the factual issue of authorship was never fully and fairly litigated in the Prior Actions and is quite different from his present claim to termination rights in the Works. Simon is correct.
33 Under the doctrine of res judicata, or claim preclusion, a final judgment on the merits of an action precludes the parties or their privies from relitigating claims that were or could have been raised in that action. See Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980). It is clear that a dismissal, with prejudice, arising out of a settlement agreement operates as a final judgment for res judicata purposes. See, e.g., Nemaizer v. Baker, 793 F.2d 58, 60-61 (2d Cir.1986). It is equally well settled, however, that a prior judgment cannot be given the effect of extinguishing claims which did not even then exist and which could not possibly have been sued upon in the previous case. Lawlor v. Nat'l Screen Serv. Corp., 349 U.S. 322, 328, 75 S.Ct. 865, 99 L.Ed. 1122 (1955). Likewise, res judicata does not bar subsequent litigation when the court in the prior action could not have awarded the relief requested in the new action. See, e.g., Leather v. Eyck, 180 F.3d 420, 425 (2d Cir.1999); Burgos v. Hopkins, 14 F.3d 787, 790 (2d Cir.1994); Davidson v. Capuano, 792 F.2d 275, 278 (2d Cir.1986). 34 Whether a claim that was not raised in the previous action could have been raised therein depends in part on whether the same transaction or connected series of transactions is at issue, whether the same evidence is needed to support both claims, and whether the facts essential to the second were present in the first. Woods v. Dunlop Tire Corp., 972 F.2d 36, 38 (2d Cir.1992) (internal quotations omitted) (emphasis added). Also dispositive to a finding of preclusive effect, is whether an independent judgment in a separate proceeding would impair or destroy rights or interests established by the judgment entered in the first action. Sure-Snap Corp. v. State Street Bank & Trust Co., 948 F.2d 869, 874 (2d Cir.1991) (internal quotations omitted). To determine whether two actions arise from the same transaction or claim, we look to whether the underlying facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties' expectations or business understanding or usage. Pike, 266 F.3d at 91 (internal quotations omitted). 35 However, [t]hat both suits involved essentially the same course of wrongful conduct is not decisive. Lawlor, 349 U.S. at 327, 75 S.Ct. 865 (internal quotations omitted). For a single course of conduct may give rise to more than a single cause of action for res judicata purposes. See id. at 327-28, 75 S.Ct. 865. 36 Although they spring from the same set of underlying facts, the claims at issue in the Prior Actions and the claims asserted in the current action are plainly distinct. In the Prior Actions, Simon claimed that he was entitled to the renewal term of copyright for the Works. In the present suit, Simon claims that he is entitled to terminate Marvel's copyright in the Works and obtain the extended copyright term by virtue of § 304(c) of the 1976 Act. As the district court correctly recognized, neither the extended copyright term nor the termination right existed at the time of the Prior Actions. Indeed, the termination right is an entirely new and wholly separate right than the renewal right. Hence, the Prior Actions could not have resolved the question of whether Simon was entitled to termination rights in the extended copyright term. Nor could the Prior Actions have awarded the relief requested in this action — the right to terminate the grant to Marvel and obtain the right to the extended copyright term — as that relief was likewise unavailable at that time. 37 Marvel cites Precision Air Parts, Inc. v. Avco Corp., 736 F.2d 1499 (11th Cir.1984), and Hernandez v. City of Lafayette, 699 F.2d 734 (5th Cir.1983) for the proposition that [a] change in law ... will only enable a party to re-litigate a claim where that change could have affected the outcome of the litigation. Appellee's Br. at 30. Marvel also argues, correctly, that despite the enactment of the 1976 Act, the 1909 Act governs the authorship of the Works at issue here. See, e.g., Roth v. Pritikin, 710 F.2d 934, 937-39 (2d Cir.1983) (holding that the 1976 Act's work for hire provisions — which differ from the 1909 Act — are not to be applied retroactively). However, it does not follow, as Marvel suggests, that since the Works' authorship was at issue in the previous actions, Simon's termination claim is precluded here. While Simon's assertion of authorship is the sine qua non of both his prior claim to renewal rights and his present claim to termination rights, it is merely an issue that determines the viability of each claim. See Yoon v. Fordham Univ. Faculty & Admin. Retirement Plan, 263 F.3d 196, 202 (2d Cir.2001). 38 This Court's reasoning in Yoon is instructive. In that case, the plaintiff had previously litigated and defaulted on his state court claim that he was entitled to his teaching salary. Thereafter, Yoon filed a suit in federal court claiming entitlement to pension benefits under ERISA. The district court granted the defendant's motion to dismiss, holding that Yoon's ERISA claim was barred on res judicata grounds. See id. at 198-200. On appeal, the defendant urged this Court to affirm the district court's decision because res judicata prevented Yoon from proving his entitlement to pension benefits. We rejected that argument, explaining: 39 [T]he fact that, because of res judicata, Yoon cannot raise the question of his right to salary for purposes of getting salary (past, present, and future) does not mean that he is barred from raising the question of his entitlement to salary in order to establish a contractual basis for the payment of pensions. For to deprive Yoon of the right to litigate the issue of his entitlement to salary would be to estop him collaterally from doing so. 40 Id. at 202 n. 7 (emphasis in original); accord St. Pierre v. Dyer, 208 F.3d 394, 400-01 (2d Cir.2000) (finding that even if the plaintiff's claims for damages were barred by res judicata, he is not necessarily precluded from proving [some of the underlying issues of that claim] in connection with his claims for indemnification and contribution). 41 Applying Yoon's reasoning here, it is clear that Simon is not precluded from claiming that he is the author of the Works for purposes of exercising the termination right under § 304(c). While Simon would be precluded from claiming that he was entitled to benefits flowing from the initial twenty-eight year renewal period, that is not his claim. He is claiming that he is entitled to terminate Marvel's copyright in the Works, a claim that did not exist when the Prior Actions were settled. Therefore, the district court was correct that res judicata does not bar Simon from asserting that the Termination Notices are valid.
42 Collateral estoppel, or issue preclusion, prevents parties or their privies from relitigating in a subsequent action an issue of fact or law that was fully and fairly litigated in a prior proceeding. See Boguslavsky v. Kaplan, 159 F.3d 715, 719-20 (2d Cir.1998); see also Comm'r of Internal Revenue v. Sunnen, 333 U.S. 591, 598, 68 S.Ct. 715, 92 L.Ed. 898 (1948) (Once a party has fought out a matter in litigation with the other party, he cannot later renew that duel.). Collateral estoppel applies when: (1) the identical issue was raised in a previous proceeding; (2) the issue was actually litigated and decided in the previous proceeding; (3) the party had a full and fair opportunity to litigate the issue; and (4) the resolution of the issue was necessary to support a valid and final judgment on the merits. Boguslavsky, 159 F.3d at 720 (internal quotations omitted). 43 Simon does not dispute that he raised the issue of the Works' authorship in the Prior Actions; nor does he contest that, by virtue of the stipulations of dismissal filed in the Prior Actions, he did not prevail on that issue. However, where a stipulation of settlement is unaccompanied by findings, it does not bind the parties on any issue ... which might arise in connection with another cause of action. Lawlor, 349 U.S. at 327, 75 S.Ct. 865; see also Motrade v. Rizkozaan, Inc., No. 95 Civ. 6545, 1998 WL 108013, at  (S.D.N.Y. March 11, 1998) (To have a preclusive effect on specific issues or facts, however, a voluntary dismissal also must be accompanied by specific findings sufficient for a subsequent court to conclude that certain matters were actually decided.). 44 Here, although the Settlement Agreement contained detailed findings on the authorship issue, neither of the stipulations filed in the Prior Actions contain any specific findings as to whether Simon authored the Works independently or whether the Captain America character was created as a work for hire. Nor do the stipulations reference the Settlement Agreement in any way. Therefore, the stipulations do not collaterally estop Simon from litigating the issue of authorship underlying his termination claim in this action. 45