Opinion ID: 1996396
Heading Depth: 2
Heading Rank: 1

Heading: Must issue preclusion be pled? Offensive issue preclusion lacks some of the policy support underlying the defensive use of the doctrine.

Text: First, offensive use of collateral estoppel [issue preclusion] does not promote judicial economy in the same manner as defensive use does. Defensive use of collateral estoppel precludes a plaintiff from relitigating identical issues by merely switching adversaries. Thus defensive collateral estoppel gives a plaintiff a strong incentive to join all potential defendants in the first action if possible. Offensive use of collateral estoppel, on the other hand, creates precisely the opposite incentive. Since a plaintiff will be able to rely on a previous judgment against a defendant but will not be bound by that judgment if the defendant wins, the plaintiff has every incentive to adopt a wait and see attitude, in the hope that the first action by another plaintiff will result in a favorable judgment. Thus offensive use of collateral estoppel will likely increase rather than decrease the total amount of litigation, since potential plaintiffs will have everything to gain and nothing to lose by not intervening in the first action. Parklane Hosiery Co., 439 U.S. at 329-30, 99 S.Ct. at 650-51, 58 L.Ed.2d at 561 (citation omitted) (footnote omitted). A second argument against offensive use of collateral estoppel is that it may be unfair to a defendant. If a defendant in the first action is sued for small or nominal damages, he may have little incentive to defend vigorously, particularly if future suits are not foreseeable. Id. at 330, 99 S.Ct. at 651, 58 L.Ed.2d at 561; see also Blonder-Tongue Labs. v. Univ. of Ill. Found., 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971). The fairness issue is stressed by the city here: the rain amount in 1999, said to be a 500 year rain, greatly exceeded that in 1996, characterized as a once in a lifetime rain, and the amount of damages was considerably higher ($695,237.39 to $67,851). The city contends it was unfair to apply issue preclusion because it was not reasonably foreseeable to the city that a rain of this magnitude in 1999 would come within only three years of the 1996 event, which was itself almost unprecedented. The city relies on one of the examples in Hunter illustrating when offensive issue preclusion should not be applied. That is when `it was not sufficiently foreseeable at the time of the initial action that the issue would arise in the context of a subsequent action....' Hunter, 300 N.W.2d at 125 n. 4 (quoting Restatement (Second) of Judgments § 68.1 (Tentative Draft No. 4, 1977)). In other words, it was not reasonably foreseeable that the size of the drainage pipe found to be insufficient for a once in a lifetime rain would be an issue only three years later, when a 500 year rain and its resulting greater damage occurred. If a party fails to assert offensive issue preclusion at the earliest practicable time, the unfairness already inherent in offensive issue preclusion will only be exacerbated. That is why, we believe, the general rule is that issue preclusionwhether offensive or defensivemust be pled and proved by the party asserting it. [1] A party asserting res judicata (or mutual collateral estoppel) must plead and prove the identity of parties, that is that the parties in the prior action were the same as the parties to the pending action, or that the parties to the pending action are in privity with the parties to the prior action. Absent such allegation or proof, res judicata is unavailable. In jurisdictions where the requirement of mutuality has been abandoned for the doctrine of collateral estoppel, the party asserting collateral estoppel is required to plead and prove that the party against whom the doctrine is asserted was a party or in privity with a party to the prior action. 47 Am.Jur.2d Judgments § 724, at 194-95 (1995) (footnotes omitted); see also 18 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 4405, at 82 (2d ed.2002) [hereinafter Wright & Miller] (Ordinarily both issue preclusion and claim preclusion are enforced by awaiting a second action in which they are pleaded and proved by the party asserting them.). This authority has further stated: In contrast to the well-settled rules that apply to defendants, the procedural requirements imposed on plaintiffs who wish to assert preclusion have received surprisingly little attention. It seems useful to draw a distinction between a plaintiff's reliance on res judicata to defeat some position taken by the defendant and a plaintiff's reliance on res judicata to establish a claim.... ... [I]t is difficult to understand why plaintiffs should not be required to plead preclusion as clearly as defendantsthe need for notice and an opportunity to respond seems the same. The most frequent need for a specific pleading is likely to arise from the growing use of nonmutual offensive issue preclusion; although some circumstances may lead a defendant to expect the preclusion argument, the weaker the argument the greater the need for notice. Some courts have suggested that specific notice is required, and the same approach has been taken when a demand for declaratory relief rests on preclusion. This approach should be followed by asking that notice be provided without insisting on a particular method of notice by pleading. Whatever the method by which the question is raised, the burden of establishing preclusion is placed on the party claiming it. 18 Wright & Miller § 4405, at 108-10. In Iowa we apparently have no cases directly on point. In Hunter the manner of raising the offensive issue preclusion was not discussed because it was not an issue. In that case, the plaintiff specifically pled offensive issue preclusion. See Hunter, 300 N.W.2d at 124. Cases from other jurisdictions, however, hold that issue preclusion must be pled. See, e.g., Harvey v. United Transp. Union, 878 F.2d 1235 (10th Cir.1989). Although the use of issue preclusion by plaintiffs is not subject to [Federal Rule of Civil Procedure 8(c)], the rationale for requiring a party to plead defensive issue preclusion pretrial applies to offensive use as wellto provide the opposing party notice of the plea of estoppel and a chance to argue, if he can, why the imposition of an estoppel would be inappropriate. Although this notice requirement was established in a case approving defensive use of issue preclusion, it has even more force for offensive use, when, as here, plaintiffs seek to benefit from litigation to which they were not parties. Id. at 1243 (quoting Blonder-Tongue Labs., Inc., 402 U.S. at 350, 91 S.Ct. at 1453, 28 L.Ed.2d at 812) (emphasis added); see also Herzbrun v. Milwaukee County, 504 F.2d 1189, 1196 (7th Cir.1974) (plaintiffs failed to raise claim of offensive issue preclusion in a pleading or motion; offensive issue preclusion rejected); Cashelmara Villas, Ltd. P'ship v. DiBenedetto, 87 Ohio App.3d 809, 623 N.E.2d 213, 215 (1993) (must plead and prove issue preclusion); Monahan v. Eagle Picher Indus., Inc., 21 Ohio App.3d 179, 486 N.E.2d 1165, 1168 (1984) (In order to assert collateral estoppel successfully, a party must plead and prove [it].). The plaintiffs do not challenge the general rule that a party claiming issue preclusion must claim and prove it. Rather they argue, and the district court ruled, that (1) our notice-pleading rules do not require the pleading of a theory of recovery, and (2) the city tried the issue by consent. B. Issue preclusion principles applied. The plaintiffs correctly note that, under notice pleading, a petition need not identify a specific legal theory; it is sufficient if the prima facie elements of a claim are stated, and this is fair notice to the defendant. Soike v. Evan Matthews & Co., 302 N.W.2d 841, 842 (Iowa 1981) (citing Lamantia v. Sojka, 298 N.W.2d 245, 247 (Iowa 1980)). However, the petition must apprise a defendant `of the incident out of which the claim arose and of the general nature of the action.' Lamantia, 298 N.W.2d at 247 (quoting Roberts v. Acres, 495 F.2d 57, 58 (7th Cir.1974)); accord Smith v. Smith, 513 N.W.2d 728, 730 (Iowa 1994). The petitions in this case cannot be construed broadly enough to encompass offensive issue preclusion because they did not identify either the incident giving rise to the claim of issue preclusion or the general nature of the claim. The incident identified in these petitions was the flood of 1999, and the general nature of the claim was that the city was negligent in designing the drainage system. However, the plaintiffs' claim of issue preclusion is based on an entirely different incident: the district court's entry of the allegedly preclusive judgment in 1996. The general nature of the plaintiffs' present claims, i.e., issue preclusion, moreover, could not be gleaned from the petition, which alleged elements of negligent designnot issue preclusion. Cf. Davis v. Ottumwa YMCA, 438 N.W.2d 10, 13 (Iowa 1989) (It is difficult to believe that a state common-law claim based on negligence and breach of contract could be construed to be fair notice of an intent to rely on a federal statutory [ERISA] claim.). C. The tried by consent argument. The plaintiffs contend the city implicitly agreed to resolve the issue-preclusion claim on its merits by failing to actively oppose it. The facts, however, do not support that argument. As soon as the plaintiffs asserted the issue-preclusion claim in their motion for partial summary judgment, the city resisted. The court did not rule on the summary-judgment motion until a week before the trial began. The day after the court ruled on the summary-judgment motion, the city applied for discretionary review in our court and also filed a motion for a continuance. The court did not rule on the motion for a continuance until the day of trial and then denied it. From the day the plaintiffs filed their motion for partial summary judgment until, literally, the trial was underway, the city did not know whether it was defending a fact issue on their alleged negligence or a legal issue on the application of issue preclusion. In view of this procedural history, we reject the plaintiffs' argument that the city litigated the issue-preclusion matter by not sufficiently resisting it.