Opinion ID: 706975
Heading Depth: 1
Heading Rank: 2

Heading: Preclusive Effect of the State Court Proceedings

Text: 11 Federal courts must give the same preclusive effect to state court judgments that those judgments would be given in that state's own courts. 28 U.S.C. Sec. 1738. See also Kremer v. Chemical Construction Corp., 456 U.S. 461, 465, 102 S.Ct. 1883, 1889, 72 L.Ed.2d 262 (1982). Although different preclusion rules apply in some circumstances to unreviewed findings of administrative proceedings, see Miller v. County of Santa Cruz, 39 F.3d 1030 (9th Cir.1994); McInnes v. California, 943 F.2d 1088 (9th Cir.1991), section 1738 by its own terms applies when administrative findings have been reviewed by state courts of general jurisdiction. Id. See also Eilrich v. Remas, 839 F.2d 630, 632 (9th Cir.1988) (federal courts must give preclusive effect to state court reviewed administrative determinations). Here, there are written decisions by the Board of Trustees containing findings of facts and conclusions of law. These decisions were reviewed by the Nevada district court which issued its own written decision containing factual findings and conclusions of law affirming the Board's decision as supported by substantial evidence. This latter decision was in turn reviewed by the Nevada Supreme Court which partially affirmed and partially reversed. Thus, we must address the question of the preclusive effect to be given to the state proceedings. 12
13 As described above, the Clementses initially sought review of their employment terminations through the Airport Authority's administrative grievance process, and when this ultimately produced an adverse decision, the couple petitioned for judicial review under the Nevada APA in state district court. By the time this case reached our court on appeal from summary judgment in federal district court, the Nevada state district court had issued a decision denying the Clementses' petition for review, and an appeal from that decision was pending in the Nevada Supreme Court. The initial state district court decision had been issued prior to the federal district court decision. 14 At first glance, the question whether the Clementses had a property interest in their employment for purposes of their Due Process claims seemed intimately connected to the question whether the Clementses were protected by the Airport Authority's somewhat complicated civil service system. Although the state proceedings did not adjudicate the constitutional claims, their resolution of the civil service claims appeared to provide an authoritative construction of the Airport Authority's civil service regulations, and appeared to answer the questions whether the Clementses' jobs were covered by the system and whether the requisite civil service procedures had been followed. Despite the apparent overlap of issues, there was a complete absence of any discussion of the potential preclusive effect of either the state administrative proceedings or the state district court decision in the proceedings below. No mention of preclusion appeared in either the federal district court decision or any of the initial briefs filed in this court. Accordingly, we requested supplemental briefing on this question. 3 15 In the first set of supplemental briefs, only one cursory sentence on the final page of the defendants' brief suggested that the doctrine of claim preclusion might be applicable to this case. The remainder of the brief presented extensive arguments as to the issue preclusive effect that should be given to the state court proceedings. The plaintiffs' supplemental brief was similarly restricted to a discussion of issue preclusion. 16 Two months after we heard oral argument, the Nevada Supreme Court issued its long awaited opinion. Shortly thereafter, we again requested supplemental briefing; this time on the effect, if any, of the Nevada Supreme Court's decision on this federal action. It was in response to this final request for additional briefing that the defendants elected to assert an argument that the entire federal action is barred by the doctrine of claim preclusion.
17 Claim preclusion is a broad doctrine that bars bringing claims that were previously litigated as well as some claims that were never before adjudicated. Assuming the basic requirements of claim preclusion are met, certain unlitigated claims merge with the prior judgment in the case. This federal action contains claims that are completely distinct from those originally brought in the state court when the Clementses sought review of the administrative agency proceedings. These distinct claims (e.g. the retaliatory discharge claim) have never been adjudicated. It is these unlitigated claims that the defendants now assert are forever barred. 18 The defendants present some facially valid arguments regarding the applicability of claim preclusion doctrine to the present case. Generally, a state court judgment has the same preclusive effect in federal court as that judgment would have in the courts of the rendering state. Kremer, 456 U.S. at 465, 102 S.Ct. at 1889. This rule applies in a federal Sec. 1983 civil rights action and includes both principles of claim preclusion and issue preclusion. See Migra v. Warren City School District, 465 U.S. 75, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984). The primary exception to this general rule is that we do not give preclusive effect to judgments rendered in proceedings that fail to comply with the minimum standards of due process. In other words, the party against whom preclusion is urged must have had a full and fair opportunity to litigate his claim. See Kremer, 456 U.S. at 480-82, 102 S.Ct. at 1897-98. Thus, in the ordinary case, so long as due process was provided, we would look to the law of Nevada to determine the preclusive effect to give to the prior judgment here. 4 However, this is not the ordinary case. 19 There is another important exception to the general rule regarding the preclusive effect of state court judgments in federal court which controls the outcome of the issue here--waiver. Claim preclusion is an affirmative defense which may be deemed waived if not raised in the pleadings. Kern Oil v. Tenneco, 840 F.2d 730, 734-35 (9th Cir.1988). Moreover, the failure of the defendant to object to the prosecution of dual proceedings while both proceedings are pending also constitutes waiver. Id. See also Bradley v. Pittsburgh Bd. of Educ., 913 F.2d 1064, 1072-73 (3d Cir.1990) (defendant acquiesced to reservation of federal claim in state proceedings by failing to object); Calderon Rosado v. General Electric, 805 F.2d 1085 (1st Cir.1986) (court refused to apply claim preclusion because defendant acquiesced to splitting of claim when he failed to object or complain while the two actions were pending); Restatement (Second) Judgments Sec. 26(1)(a) (1982). 5 A main purpose behind the rule preventing claim splitting is to protect the defendant from being harassed by repetitive actions based on the same claim. Restatement (Second) Judgments, Sec. 26 comment a. Many commentators reason that where a defendant acquiesces in the split, the rule should be inapplicable. Id. 6 We agree. 20 After reviewing the entire record in this federal action, we conclude that these principles of waiver should be applied to the defendants here. Although the defendants list several affirmative defenses in their responsive pleadings, the defense of claim preclusion is not among them. Moreover, the record shows that at no time did the defendants raise any such issue in the district court, nor in the brief originally filed in this court. 7 Similarly, they never objected to the splitting of any claim or to the prosecution of the two cases at the same time in the state and federal courts. Although the defendants finally elected to assert claim preclusion in the supplemental briefs filed three months after oral argument, we nonetheless deem that they have waived their right to do so. 21 Allowing the defendants to assert claim preclusion at this late stage would work a substantial injustice on the plaintiffs. At the time this federal action commenced, the petition for judicial review was still pending in the state district court. If the defendants had asserted their defense at that time, either by formally objecting to the dual proceedings through a motion to dismiss or by asserting the defense in their responsive pleadings, the plaintiffs would have had timely notice of the defendants claim and would have been able to take appropriate action in the state court proceedings (e.g. by attempting to amend the petition for judicial review to include the claims raised in the Sec. 1983 action). Rather than asserting the defense when timely, the defendants have waited until several years after the original federal complaint was filed. Under any generous standard of judicial discretion, this is far too late; and thus, we decline to recognize the defendants' belated assertion of this defense. 8 We hold that the defendants have waived any defense premised on claim preclusion in this federal action.
22 The principles of waiver that apply to claim preclusion defenses, also apply to issue preclusion. As we have the ability to overlook waiver and raise the res judicata issue sua sponte we may do so with respect to issue preclusion. Here, while we decline to recognize the defendants' untimely claim preclusion defense, we conclude that the considerations and concerns that compel that decision are not present with respect to issue preclusion. 23 Preclusion doctrine encompasses vindication of both public and private interests. The private values protected include shielding litigants from the burden of re-litigating identical issues with the same party, and vindicating private parties' interest in repose. The public interests served include avoiding inconsistent results and preserving judicial economy. See 18 Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction Sec. 4403 at 11-18. 24 The relative weights of these public and private interests vary depending upon the type of preclusion at stake. For example, the most purely public purpose served by preclusion rules is that of preserving the acceptability of judicial dispute resolution against the corrosive disrespect that would follow if the same matter were twice litigated to inconsistent results. Id. at 12. Vindication of this public interest is at its zenith in the realm of issue preclusion. It is the failure to adhere closely to basic issue preclusion principles that is most likely to lead directly to the inconsistent results that tend to undermine confidence in the judicial process. In contrast, the broader doctrine of claim preclusion, which bars the litigation of issues never before tried, has at its fundamental base the vindication of private litigants' interest in repose. 25 In resolving the question of claim preclusion, we found countervailing private interests that led us to apply strictly fundamental principles of waiver--the failure to hold the defendants to their waiver would subject the plaintiffs to gross prejudice. However, no such countervailing interests arise with respect to issue preclusion in this case. In issue preclusion, the only litigation barred is the re-litigation of an issue that has been actually litigated and necessarily decided. 9 Where the plaintiffs have had a full and fair opportunity to actually litigate the issue and did in fact litigate it, they can not ordinarily be prejudiced by subsequently being held to the prior determination. Moreover, the public interest would be greatly advanced by the application of issue preclusion here. It would avoid inconsistent results and would assist in the conservation of our judicial resources. Accordingly, despite the defendants' failure to raise the issue preclusion defense in a timely manner, we will nonetheless apply the doctrine in this case. 26 Thus, to the extent that issues regarding the Clementses' employment status were resolved in the state court litigation, relitigation of those issues in federal court is precluded. While this conclusion benefits Sue, it has a harmful effect on some of Douglas' claims. Recognizing this fact, the Clementses argue that while we should give preclusive effect to those issues which benefit Sue, we should not apply issue preclusion with respect to matters decided adversely to Douglas. They base their argument on the contention that the administrative proceedings took place in a biased and partial forum, and for this reason, they say, Douglas has never had a full and fair opportunity to litigate his claims. 27 Unfortunately for the Clementses, any bias or shortcomings that existed in the administrative process did not affect the outcome of the issue that was decided adversely to Douglas. The determination to which we give preclusive effect here is the Nevada Supreme Court's ruling that Douglas was an at-will employee and that he was not covered by the Airport Authority's civil service system. The Nevada Supreme Court decided the issue of Douglas' employment status as a matter of legal interpretation and expressly noted that it would reach the same decision whether or not it gave deference to the prior agency determinations. It determined as a matter of law that Douglas was a department head who served at the pleasure of the Executive Director, and who was outside the civil service coverage of the manual. Because the determination to which we give preclusive effect does not rest on deference to the administrative findings but rather involved a pure question of law, the issue of alleged bias did not color the outcome of the state court proceedings. 10