Opinion ID: 1294348
Heading Depth: 1
Heading Rank: 3

Heading: Offensive Use of Collateral Estoppel

Text: Wal-Mart contends that the trial court erred in granting Guaranty summary judgment precluding Wal-Mart from litigating the validity of the compensation contract. We disagree. The offensive use of collateral estoppel was first adopted in this State by our Court of Appeals in Beall v. Doe , 281 S.C. 363, 315 S.E. (2d) 186 (Ct. App. 1984). Collateral estoppel occurs when a party in a second action seeks to preclude a party from relitigating an issue which was decided in a previous action. The Court of Appeals adopted the general rule and exceptions as set forth in Restatement (Second) of Judgments, §§ 27, 28 and 29 (1982). Section 27 provides that 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. Section 28 provides five exceptions to this general rule. Section 29 discusses when collateral estoppel may be used by a person who was not a party in the first action. Nonmutual collateral estoppel may be asserted unless the party precluded lacked a full and fair opportunity to litigate the issue in the first action or other circumstances justify affording him the opportunity to relitigate the issue. Eight circumstances are provided which should be considered in addition to the exceptions in Section 28. We hereby adopt the general rule as set forth in the Restatement, and find that the offensive use of collateral estoppel is appropriate in this case. The illegality of the contract has been actually litigated and directly determined in the prior action and that issue was essential to the judgment. Wal-Mart contends the determination relied on as preclusive is inconsistent with another determination of the same issue, relying upon the Restatement (Second) of Judgments § 29(4). The inconsistent decisions to which Wal-Mart refers are the district court's decision and the appellate decision of the same case. Clearly these decisions are not inconsistent, the appellate decision is the final decision of that case. Wal-Mart next argues, pursuant to Restatement (Second) of Judgments § 28(4), that the burden of persuasion has shifted from the party opposing collateral estoppel to its adversary, and that therefore collateral estoppel is inappropriate. We reject this argument. In the Arkansas lawsuit, Wal-Mart argued that the contract was legal and enforceable. That is still their position. They failed to prove the legality of the contract in the previous proceeding. Wal-Mart next contends, relying upon the Restatement (Second) of Judgments § 29(7), that the issue is one of law and treating it as conclusively determined would inappropriately foreclose the opportunity for obtaining reconsideration of the legal rule upon which it is based. Wal-Mart argues that South Carolina law should be considered in reaching a determination on these issues. Wal-Mart has raised equitable arguments concerning Guaranty's actions. Specifically, Wal-Mart argues that South Carolina law should be considered in determining the issues of waiver, estoppel and unclean hands. Guaranty's actions are, however, immaterial to the legality of the contract. Guaranty was not involved with this matter until several years after the formation of the contract and, therefore, its actions could not have an effect on that issue. On the specific issue of the legality of the contract, the Eighth Circuit considered South Carolina workers' compensation laws and found the contract to be in violation of these laws. See Wal-Mart Stores, Inc. v. Crist , 855 F. (2d) 1326, 1333 notes 7 and 8. (8th Cir.1988). Wal-Mart lastly contends that other compelling circumstances make it appropriate that it be permitted to relitigate the issue. Restatement (Second) of Judgments § 29(7). This Court has refused to adopt comment g of this Restatement Section recently, which comment relates to § 29(7). See Palm v. General Painting Co. , ___ S.C. ___, 396 S.E. (2d) 361 (1990). Wal-Mart asserts that equitable considerations such as Guaranty's unclean hands justify relitigation. We disagree. Moreover, we note that Guaranty's actions had nothing to do with the formation of the contract between Wal-Mart and Transit. Therefore, we believe that the trial court should have granted full summary judgment for Guaranty, and the lower court's order is modified accordingly.