Opinion ID: 1871044
Heading Depth: 1
Heading Rank: 5

Heading: Directions for Remand

Text: Our necessary and essential requirement parallels the standard set forth in the first Restatement of Judgments, which stated collateral estoppel is applicable to the determination of facts in issue, but not to the determination of merely evidentiary facts, even though the determination of the facts in issue is dependent upon the determination of the evidentiary facts. Restatement of Judgments § 68 cmt. p (1942). Judge Learned Hand stated this distinction more succinctly when he wrote: [A] fact may be of two kinds. It may be one of those facts, upon whose combined occurrence the law raises the duty, or the right, in question; or it may be a fact, from whose existence may be rationally inferred the existence of one of the facts upon whose combined occurrence the law raises the duty, or the right. The first kind of fact we shall for convenience call an ultimate fact; the second, a mediate datum. Ultimate facts are those which the law makes the occasion for imposing its sanctions. Evergreens, 141 F.2d at 928. This section was significantly altered in 1982 by the Second Restatement of Judgments. The second Restatement rejected rote application of the ultimate fact/evidentiary fact analysis because, even if a fact is properly categorized as evidentiary, great effort may have been expended by both parties in seeking to persuade the adjudicator of its existence or nonexistence and it may well have been regarded as the key issue in the dispute. Restatement (Second) of Judgments § 27 cmt. j (1982). The second Restatement replaced its comment discussing the distinction between ultimate and evidentiary facts with a new analysis where the court must determine whether the issue was actually recognized by the parties as important and by the trier as necessary to the first judgment. Id. (emphasis added). This important and necessary analysis protects parties from the dangers of innocuous, subsidiary facts because it only precludes such facts as were truly disputed in the first proceeding. Or, as aptly stated by the First Circuit Court of Appeals, [w]hen two adversaries concentrate in attempting to resolve an issue importantly involved in litigation, there is no unfairness in considering that issue settled for all time between the parties and those in their shoes. But ... it is unfair to close the door to issues which have not been on stage center, for there is no knowing what the white light of controversy would have revealed. Farmington Dowel Prods. Co. v. Forster Mfg. Co., 421 F.2d 61, 79 (1st Cir.1970). Because this analysis protects against the dangers stemming from preclusion on subsidiary facts, we adopt this analysis as well. Rather than pigeonholing facts as evidentiary or ultimate, courts must determine whether the issue was actually recognized by the parties as important and by the adjudicator as necessary to the first judgment. Under this analysis, collateral estoppel will only adhere to those factual findings necessary and essential to the prior judgment, rather than findings of every minute fact contested by the parties in the previous trial. As noted above, the parties agree 16 of the 352 factual findings granted preclusive effect by the district court were necessary and essential to the underlying judgment. For example, findings 33 and 34 hold: 33. Microsoft enjoys so much power in the market for Intel-compatible PC operating systems that if it wished to exercise this power solely in terms of price, it could charge a price for Windows substantially above that which could be charged in a competitive market. Moreover, it could do so for a significant period of time without losing an unacceptable amount of business to competitors. In other words, Microsoft enjoys monopoly power in the relevant market. 34. Viewed together, three main facts indicate that Microsoft enjoys monopoly power. First, Microsoft's share of the market for Intel-compatible PC operating systems is extremely large and stable. Second, Microsoft's dominant market share is protected by a high barrier to entry. Third, and largely as a result of that barrier, Microsoft's customers lack a commercially viable alternative to Windows. Both of these findings were necessary and essential to the underlying judgment because the court had to establish Microsoft had monopoly power before it could conclude Microsoft maintained monopoly power. These findings were also important because both parties debated the relevant market and Microsoft's monopoly power in that market. Because the district court failed to apply the proper standard in evaluating plaintiffs' collateral estoppel claims, we reverse its order. The case is remanded to that court for a reconsideration of this issue under the standard that we have articulated, aided by the more particularized arguments that will now be available to counsel as the result of our clarification of the rule of law to be applied. On remand, the parties herein will have the opportunity to convince the court which facts were actually recognized by the parties in the Government Action as the key issues in dispute and by the adjudicator as necessary to the final judgment.