Opinion ID: 1613273
Heading Depth: 2
Heading Rank: 2

Heading: Identity of Issue and Parties

Text: The appellants do notindeed, cannot seriously contend that the issues asserted in its action before the NASD are different from those involved in Alabama-Baker IV. In fact, at the heart of both cases is one dispositive factual issue. That issue is whether account number XXX-XXXXX was a personal account of Baker. If it was, it was subject to discovery, and Merrill Lynch could not be held liable for disclosing it. That that issue was actually litigated in Alabama-Baker IV cannot be disputed. In its October 25, 1994, order, the trial judge declared: The court specifically finds as a matter of fact that Baker's Merrill Lynch account [XXX-XXXXX] is a personal account of Baker's. (Emphasis added.) Obviously, that finding was necessary to the judgment, because the action was commenced for the very purpose of discovering and preserving assets held for Baker by Merrill Lynch. Because this Court affirmed that judgment without an opinion, the correctness of the findings on which the judgment was based is not before us in this case. Indeed, the only element about which there is a colorable controversy is the identity of the parties. Specifically, Baker and the PC contend that the doctrine of collateral estoppel does not bar the PC's claims before the NASD, because, they insist, the PC was not a party in Alabama-Baker IV. To be sure, the PC was not a named party in that case. Ordinarily, [a] party to the second suit will not be estopped from relitigating an issue unless all of the requisite elements exist. It is noteworthy that Alabama has not followed the trend of abolishing the requirement that parties be identical, sometimes referred to as the mutuality of estoppel requirement. McMillian v. Johnson, 878 F.Supp. 1473, 1520 (M.D.Ala.1995), rev'd in part on other grounds, 88 F.3d 1554 (11th Cir.1996), cert. denied, 521 U.S. 1121, 117 S.Ct. 2514, 138 L.Ed.2d 1016 (1997). An exception is made to this requirement for parties in privity with a party to the prior action. Id. (emphasis added). Thus, regardless of the fact that the PC was not a named party in Alabama-Baker IV, it will be bound by that judgment if it was in privity with Baker. `The term privity has not been uniformly defined with respect to [collateral estoppel].' Hughes v. Martin, 533 So.2d 188, 191 (Ala.1988) (quoting Issue Preclusion in Alabama, 32 Ala. L.Rev. 500, 520-21 (1981)). Privity is often deemed, however, to arise from `(1) the relationship of one who is privy in blood, estate, or law; (2) the mutual or successive relationship to the same rights of property; [or] (3) an identity of interest in the subject matter of litigation.' Id. Thus, the existence of privity has generally been resolved `on an ad hoc basis in which the circumstances determine whether a person should be bound by or entitled to the benefits of a judgment.' Id. See also Dairyland Ins. Co. v. Jackson, 566 So.2d 723, 726 (Ala. 1990) (collecting cases). Generally, a corporation is in privity with its sole shareholder for collateral estoppel purposes. A ruling adverse to a controlling person of a corporation precludes the corporation from litigating that claim in a subsequent action. Jordache Enters., Inc. v. National Union Fire Ins. Co. of Pittsburgh, 204 W.Va. 465, 479 n. 16, 513 S.E.2d 692, 706 n. 16 (1998) (quoting 50 C.J.S. Judgment § 867, pp. 441-42 (1997))(emphasis added). See also Restatement (Second) of Judgments § 59(3)(b) (1982). It is undisputed that Baker is the owner and sole shareholder of the PC. Moreover, in holding that the PC was collaterally estopped from asserting claims in arbitration that depended for their efficacy on a finding contrary to the finding of the court in Alabama-Baker IV, the trial court expressly found the following: Mr. Baker has been the PC's only president and is the only person with a financial interest in the PC; the PC has had no employees since 1987; for years, the PC has not actively engaged in the practice of law (in fact, for years it has done nothing on a daily basis); it has held no meetings; it has kept no corporate minutes; it has paid no salaries; its funds have been used for Mr. Baker's personal purposes; ... and Mr. Baker himself gave testimony suggesting that he and his PC were one and the same. (Emphasis added.) Indeed, those findings are also undisputed. On these facts, we conclude that Baker and the PC are in privity, and, therefore, that the identity-of-parties element of collateral estoppel is also satisfied. Consequently, the trial court correctly held that the PC's claims in arbitration are barred by collateral estoppel.