Opinion ID: 3011093
Heading Depth: 4
Heading Rank: 2

Heading: New Jersey's Interests and the Risks of Forum-

Text: Shopping New Jersey's main justification for the doctrine, its interest in preserving its judicial resources, is minimized when none of the prior litigation took place in New Jersey state courts. See Rochelle Cooper Dreyfuss & Linda J. Silberman, Interjurisdictional Implications of the Entire Controversy Doctrine, 28 Rutgers L.J. 123, 156 (1996). New Jersey state courts still apply the doctrine in such cases, which conserves some of New Jersey's judicial resources by precluding subsequent litigation in New Jersey. By contrast, when both prior and subsequent litigation takes place outside the New Jersey state courts, it is hard to see any New Jersey resource interest whatsoever, except inasmuch as the size of the federal docket indirectly affects the state courts. The risk of unfair surprise is also heightened where the initial litigation did not take place in New Jersey; it may be difficult for responsible lawyers to predict that litigation in New York or California will close the New Jersey federal courts to future claims. See id. at 169; cf. Electro-Miniatures Corp. v. Wendon Co., 889 F.2d 41, 45 & n.6 (3d Cir. 1989) (expressing the concern that, if the entire controversy doctrine were applied to out-of-state judgments in New Jersey federal court, other jurisdictions would be adversely affected by the need to tailor litigation to avoid preclusion in New Jersey). But see Perry Dane, Dignity and Glorious Chaos: A Comment on the Interjurisdictional Implications of the Entire Controversy Doctrine, 28 Rutgers L.J. 173 (1996) (arguing that the problems with the doctrine are overstated). Given New Jersey's recognition, in Watkins and _________________________________________________________________ application of the entire controversy doctrine to the facts, see 18 Wright et al., Federal Practice & Procedure S 4418, at 171 (1981) (discussing the preclusive effects of determinations that do not go to the merits), but we need not delve further into these murky preclusion waters to decide the case before us. 15 Mortgagelinq, that other jurisdictions have significantly different preclusion doctrines and a strong interest in giving effect to those doctrines, we do not believe that a decision requiring federal courts to apply federal preclusion law would depreciate New Jersey law. Some commentators have argued that Mortgagelinq was wrongly decided and that the Full Faith and Credit Act does not give New Jersey the freedom to give other courts' decisions greater preclusive effect than those courts would allow. See Stephen B. Burbank, Where's the Beef? The Interjurisdictional Effects of New Jersey's Entire Controversy Doctrine, 28 Rutgers L.J. 87 (1996). Professor Burbank argues that Mortgagelinq works against the compelling interest in national unity by requiring litigants in other states to consider the preclusive effects of their cases on future cases in New Jersey, regardless of the preclusion law of the state in which they file complaints. He concludes that, regardless of New Jersey state court practice, federal courts in New Jersey should apply standard preclusion law, rather than the entire controversy doctrine, to the judgments of non-New Jersey courts. See Burbank, supra, at 100-01; see also Dreyfuss & Silberman, supra, at 15758. Professor Burbank further argues that, when a federal court in New Jersey tries to resolve this conundrum, it should apply the Full Faith and Credit Act rather than Erie balancing. Judicial balancing would be unnecessary, because Congress has explicitly instructed courts how to treat the judgments of state courts. See Burbank, supra, at 103 n.82. Thus, if the previous litigation involved in this case had taken place in a state court, we would, as a matter of course, give it the preclusive effect it would have in that state's courts. Though we find this argument persuasive, it does not dispose of this case, because the Full Faith and Credit Act does not by its terms apply here. When the prior decision is a federal decision, the Act applies only by analogy. And in that case, it is important to look to Erie principles to decide which sovereign's law to apply. The Full Faith and Credit Act has an important implication, however: If the Act instructs New Jersey federal courts how to determine the 16 preclusive effect of state decisions, there is a compelling argument for treating federal cases similarly. There is no good reason to apply New Jersey entire controversy law to determine the preclusive effects of a federal diversity case from Pennsylvania when the preclusive effects of the same case would have been governed by the law of the issuing court if it had been litigated in Pennsylvania state court. To make different rules for the two types of cases would be absurd, and would only move the potential forum-shopping problem back one level further, to the initial non-New Jersey litigation. We note another factor that diminishes the force of the Erie concerns that generally lead to application of state law. Our Erie jurisprudence counsels us to avoid situations in which parties who can invoke federal jurisdiction are treated differently from those who cannot. Because we are considering a preclusion doctrine, the question is whether parties who can invoke federal jurisdiction will be able to litigate claims that will be precluded for parties who cannot. The risk of inequitable preclusion is minimal, for the following reason: This situation arises only when there has been previous litigation outside the New Jersey state courts. However, the entire controversy doctrine would only bar a subsequent New Jersey suit if the first forum would have had jurisdiction over the claims raised in that subsequent suit. It therefore follows that there was an alternate non-New Jersey forum for the relevant claims, although in some cases that forum would be another state court. The relevant point is that no plaintiff in this situation will find itself entirely unable to litigate its claims; even if it is not able to take advantage of federal jurisdiction, it will have another state in which to bring its claims.7 _________________________________________________________________ 7. It is possible, of course, that a party who has already participated in a foreign lawsuit will mistakenly file a second suit in New Jersey state court and will lose on entire controversy grounds after the statute of limitations for filing a claim elsewhere has run, although it is not entirely clear that a plaintiff in such a situation would be subject to the doctrine. See Erenberg v. Cordero, 683 A.2d 567, 574 (N.J. Super Ct. App. Div. 1996) (Stern, J., concurring) (stating that the doctrine should only be applied to the judgments of foreign courts if the plaintiff 's claim is actually capable of being litigated in some non-New Jersey court). After 17 Any resulting disparity is no more than the disparity created by the very existence of diversity jurisdiction, which allows some parties the option of going to federal court whereas others with identical causes of action cannot.8 While a decision to apply federal preclusion law would be outcome-determinative in this case, therefore, it would not ex ante cut off or extend any substantive rights that a plaintiff would have in the absence of a New Jersey federal forum, and would be unlikely to encourage significant forum-shopping.9 Our analysis can be summarized as follows: New Jersey has no significant interest in controlling the dockets of other court systems. Moreover, application of a federal rule in the rather unusual circumstances here would be unlikely to create unfairness by causing different results in _________________________________________________________________ our decision, a plaintiff who files in New Jersey federal court will not be mistaken, and will not face this dilemma. Thus, there is a possibility that results will differ in some cases. However, Erie rules were designed to avoid conscious forum-shopping, not to increase the risks of carelessness or unfamiliarity with state law. 8. The decision to apply federal preclusion law affects forum choice in this sense only: A well-informed plaintiff might be able to split claims between some foreign court and a New Jersey federal court that, if the federal court applied the entire controversy doctrine, it would otherwise consolidate in the foreign court. But this is not the forum-shopping between state and federal court that Erie decried; it is claim-splitting, which presents different issues. As long as the plaintiff adheres to the other jurisdictions' rules of joinder, we do not think that any inequity has occurred. It is theoretically possible that variations between New Jersey choice-of-law doctrines and the choice-of-law doctrines of other jurisdictions might change the outcome on such a split claim, but we doubt that parties will base their forum choices on such exotic possibilities. 9. Relatedly, the forum-shopping concern is diminished simply because successive litigation is less common than litigation in the first instance; there are many factors that go into a decision tofile a second lawsuit, and we doubt that a decision to apply federal preclusion law will substantially alter the relevant incentives. In this case, Paramount was not even the initial plaintiff in the pre-PAC lawsuits; in a real sense, Paramount had very little choice over those fora, even though it filed counterclaims and cross-claims. 18 federal court than in state court or to cause significant forum-shopping. The issues of outcome-determinativeness and a consequent incentive to forum-shop are not free from doubt, however. Therefore, it is important for us to determine whether there is a significant federal interest counseling application of the federal rule. See Fauber v. KEM Transp. & Equip. Co., 876 F.2d 327, 331 (3d Cir. 1989). It is to this question that we now turn.