Opinion ID: 766992
Heading Depth: 3
Heading Rank: 1

Heading: Delaware Law

Text: 23 Delaware law provides that [a] claim will be collaterally estopped only if the same issue was presented in both cases, the issue was litigated and decided in the first suit, and the determination was essential to the prior judgment. Sanders v. Malik, 711 A.2d 32, 33-34 (Del. 1998). The law of this Circuit, applicable to cases not governed by state law, is similar. See Central Hudson, 56 F.3d at 368 (stating that for collateral estoppel to apply to a decision by a federal court, the issue to be precluded must be (1) identical, (2) actually litigated and decided, and (3) necessary to support a valid judgment; there also must have been (4) a full and fair opportunity to litigate the issues in the prior proceeding). 24 Johnston and Spillane would have us recognize another requirement. They start with the proposition that jurisdiction in a 225 action can be conceptualized as in the nature of in rem jurisdiction, the 'rem' being the corporate office the title to which is in dispute. Steinkraus v. GIH Corp., C.A. No. 11858, 1991 WL 3922, at , 1991 Del. Ch. LEXIS 8, at  (Del. Ch. Jan. 22, 1991); see also Arbitrium, 1997 WL 589030, at . They argue that because the 225 Action was in rem, issues decided during its course, including the ownership of a majority of TCI II's shares, cannot be given collateral estoppel effect in this later case, which is based on in personam jurisdiction. We disagree. 25 The collateral estoppel effect of the 225 Action has already been decided in the as yet incomplete Delaware litigation between the parties. The chancery court concluded there that necessary findings in the in rem proceedings could have collateral estoppel effect in subsequent in personam litigation between the same parties. It held that its decision as to majority share ownership of TCI in the in rem 225 Action -- precisely the issue as to which preclusion is sought here -- prohibited relitigation of that issue in the in personam Fraud Action in Delaware. See Technicorp Int'l II, 1997 WL 538671, at . The chancery court's conclusion is consistent with what the Delaware Supreme Court has said on the subject. In E.B.R. Corp. v. PSL Air Lease Corp., 313 A.2d 893 (Del. 1973), that court noted that [b]ankruptcy is an in rem proceeding and a party is free to withdraw from such litigation and abandon the res. . . . [A] judgment in such a proceeding does not bind personally and is not conclusive as to a fact determined, except between persons who have actually litigated that factual question. Id. at 894 n.2 (emphasis added). 1 Under applicable Delaware law, then, contrary to the position taken by Johnston and Spillane, the determination of an issue actually litigated and decided against a defendant in an in rem case may have collateral estoppel effect in a subsequent in personam proceeding. 26 We also reject Johnston and Spillane's argument that because they appeared and participated in the 225 Action in their capacity as directors, collateral estoppel cannot be applied in this in personam action. Johnston and Spillane's roles as directors and shareholders of TCI II were inextricably linked. They had every incentive to, and in fact did, vigorously contest the issue of majority stock ownership in the 225 Action. To support their claim that they were TCI II's lawful directors, Johnston and Spillane were required to establish that they, not Vendel and Arbitrium, held a majority of the shares. They failed to do so. Their federal court action is an attempt to get the proverbial second bite at the apple that collateral estoppel is designed to prevent. 2