Opinion ID: 171193
Heading Depth: 2
Heading Rank: 1

Heading: Substantive Legal Relationship

Text: Utah originally argued on appeal that privity is established under the doctrine of virtual representation because the Beneficiaries' legal interests in the Fund are identical to those of the Bigman plaintiffs and because the instant case is in the nature of an action to vindicate a public right. Because all plaintiffs, past and present, are co-beneficiaries of the Fund, and because their interest in the Fund is common rather than personal, Utah argued that litigation relating to the Fund necessarily decides every beneficiary's rights. Thus, Utah argued, the district court's finding that there was no evidence of any legal relationship or form of accountability overlooks the reality of the interest at issue in Bigman.  In support of its argument, Utah relied on the Eighth Circuit's decision in Tyus v. Schoemehl, 93 F.3d 449 (8th Cir.1996), which established a seven-factor test for virtual representation, including identity of interests, a close relationship between the parties, adequate representation by the prior party, incentive to litigate, and a suit raising a public rather than private law issue. Id. at 454-56. Utah's argument is no longer viable in light of Taylor, which not only rejected the theory of virtual representation, but also rebuffed the argument that a broader reading of nonparty preclusion is appropriate in public law litigation. Taylor, 128 S.Ct. at 2177. Taylor explained that in its decision in Richards, it observed that when a taxpayer challenges an alleged misuse of public funds or other public action, the suit has only an indirect impact on [the plaintiff's] interests. Id. (quoting Richards v. Jefferson County, Ala., 517 U.S. 793, 803, 116 S.Ct. 1761, 1768, 135 L.Ed.2d 76 (1996)). In actions of this character, the Court said, we may assume that the States have wide latitude to establish procedures ... to limit the number of judicial proceedings that may be entertained. Id. Utah stopped short of contending that all of the actions brought by beneficiaries of the Fund fall within the category described in Richards, arguing instead that the claims related to the Fund are in the nature of a taxpayer suit. Although the beneficiaries of the Fund share a common interest in the Fund, it does not appear that this interest is shared in common with the public or indeed, even with the Navajo Nation Tribe. Even if this case were construed as a public right action, however, the Taylor Court clarified that Richards merely stated that, for the type of public-law there envisioned, States are free to adopt procedures limiting repetitive litigation. Taylor, 128 S.Ct. at 2177 (citing Richards, 517 U.S. at 803, 116 S.Ct. at 1768). Thus, the Court declined to impose judicial constraint through the application of the common law of claim preclusion. Id. Any risk of vexatious repetitive lawsuits does not justify departing from the established rules of nonparty preclusion. Id. at 2178. Recognizing the futility of its virtual representation argument, Utah recasts its claim that nonparty preclusion is justified under the pre-existing substantive legal relationship exception. The district court considered a similar question in addressing the whether an express or legal relationship was a prerequisite to a virtual representation claim. Qualifying relationships include, but are not limited to, preceding and succeeding owners of property, bailee and bailor, assignee and assignor, guardian and ward and trustee and beneficiary. Richards, 517 U.S. at 798, 116 S.Ct. at 1766; Restatement (Second) of Judgments §§ 43-44, 52, 55. These exceptions originated `as much from the needs of property law as from the values of preclusion by judgment.' Taylor, 128 S.Ct. at 2172 (quoting 18A Wright & Miller, Federal Practice and Procedure § 4448 (2d ed.2002)). Utah contends that the substantive legal relationship at issue in this case is that of co-beneficiaries of the Fund. We disagree with Utah's characterization of the Fund beneficiaries' relationship. As recognized by the district court, a substantive legal relationship as contemplated by the exception is one in which the parties to the first suit are somehow accountable to nonparties who file a subsequent suit raising identical issues. Utah has never alleged a fiduciary, contractual or property relationship between current and prior litigants. Indeed, Utah continues to argue, as it did in support of its theory of virtual representation that the beneficiaries of the Fund do not hold individual or collective property rights; instead, they share an indivisible, collective interest in the trust corpus, and any obtainable remedy benefits all beneficiary class members. Such concurrent property relationships do not justify nonparty preclusion. See 18A Wright & Miller, supra § 4461 (explaining the general rule that such concurrent relationships do not justify nonparty preclusion, but are likely to provide better justification for a virtual representation analysis than most other circumstances). There is nothing in the record to support a finding that any Fund beneficiary was authorized to bring suit or was in any way accountable to any other co-beneficiary, except as representatives within the context of the class actions. Instead, it appears that the Bigman plaintiffs were mere self-appointed volunteers without authority to bind any other beneficiaries by litigation. Such an elastic concept of privity violates due process of law. Richards, 517 U.S. at 804-05, 116 S.Ct. 1761.