Court Opinion

ID: 9963376
Source: CourtListenerOpinion
Date Created: 2024-04-25 13:21:29.599891+00
Date Added: 2024-06-11T08:24:47.791699
License: Public Domain

This opinion is subject to revision before final
                      publication in the Pacific Reporter

                                 2024 UT 12

                                    IN THE

      SUPREME COURT OF THE STATE OF UTAH

                NICHOLAS KUHAR and JULIE KUHAR,
                          Respondents,
                                       v.
                 THOMPSON MANUFACTURING, INC.,
                          Petitioner.

                             No. 20220282
                         Heard January 9, 2023
                          Filed April 25, 2024

            On Certiorari to the Utah Court of Appeals

                     Third District, Salt Lake
                The Honorable Kristine E. Johnson
                         No. 190900751

                                 Attorneys:
 Colin P. King, Paul M. Simmons, Salt Lake City, Matthew Weng,
                 Bridgeton, N.J., for respondents
     Robert L. Janicki, Michael L. Ford, Sandy, for petitioner

  JUSTICE PETERSEN authored the opinion of the Court, in which
    CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE PEARCE,
          JUSTICE HAGEN, and JUSTICE POHLMAN joined.

   JUSTICE PETERSEN, opinion of the Court:
                           INTRODUCTION
    ¶1 This case involves the doctrine of issue preclusion. Under
this doctrine, a party can preclude another party from litigating an
issue if the same issue was litigated and determined in a previous
case; the previous case resulted in a final judgment on the merits; and
the party to be precluded was a party, or in privity with a party, in
the previous case. Buckner v. Kennard, 2004 UT 78, ¶ 13, 99 P.3d 842.
               KUHAR v. THOMPSON MANUFACTURING
                        Opinion of the Court

   ¶2 In the instant case, Nicholas Kuhar and his wife Julie have
asserted a product liability claim against a Utah company,
Thompson Manufacturing. They seek compensation for injuries
Kuhar sustained in New Jersey, when his safety harness failed as he
was cleaning rain gutters and he fell thirty-seven feet to the ground.
    ¶3 But this is not the first lawsuit the Kuhars have brought
involving this incident. They previously sued Thompson and other
defendants in New Jersey federal court, alleging that the harness
was defective. That suit was unsuccessful. Thompson was
dismissed from the case based on a lack of personal jurisdiction—
and the Kuhars refiled their claims against Thompson here.
Meanwhile, the other New Jersey defendants prevailed on a
summary judgment motion after the federal court excluded the
Kuhars’ expert witness. Once the New Jersey case was dismissed,
Thompson moved in the instant case to preclude the Kuhars from
litigating the issue of whether the harness was defective.
    ¶4 The district court concluded that Thompson had shown
the elements of issue preclusion were met. And this resulted in the
dismissal of the Kuhars’ claims. But the court of appeals reversed,
concluding that the issue litigated and decided in New Jersey was
not identical to the issue Thompson seeks to preclude here. Kuhar
v. Thompson Mfg. Inc., 2022 UT App 22, ¶¶ 9–10, 16, 506 P.3d 1200.
Specifically, the court of appeals concluded that the New Jersey
court had not resolved on the merits whether the harness was
actually defective, but had determined only that (1) the expert
report disclosed by the Kuhars was inadmissible, and (2) the
Kuhars needed expert testimony in order to proceed on their
claims. Id. ¶ 10. The court of appeals’ decision is now before us.
    ¶5 On certiorari, we conclude that the elements of issue
preclusion are satisfied here. As a threshold matter, we clarify that
to determine the issue-preclusive effect of the New Jersey federal
court’s judgment in this case, the substantive law of New Jersey
applies. Under that law, we conclude that the issue Thompson
seeks to preclude the Kuhars from litigating—whether the harness
was defective—was actually litigated and decided on the merits in
the New Jersey court’s summary judgment order. This is because,
in general, a ruling that plaintiffs have not met their burden of proof
functions as a determination on the merits. Accordingly, we reverse.
                          BACKGROUND
   ¶6 Nicholas Kuhar was cleaning rain gutters in New Jersey
when his safety harness failed, causing him to fall thirty-seven feet
onto crushed concrete. He suffered serious injuries. Kuhar and his
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wife, Julie, sued the companies involved in the harness’s design,
manufacture, production, and distribution in New Jersey state
court. But the defendants removed the case to the United States
District Court for the District of New Jersey.
    ¶7 Relevant here, the Kuhars asserted claims of design defect
under the New Jersey Products Liability Act. The harness consisted
of three component parts: “a ‘micrograb,’ a bolt, and a rope.” The
Kuhars alleged that the “bolt attached to the carabiner of the safety
harness snapped,” causing Kuhar’s fall.
    ¶8 In the federal court, the Kuhars amended their complaint
to add Thompson Manufacturing as a defendant, asserting that
Thompson “advertised, promoted, sold, distributed, and otherwise
introduced into the stream of commerce the safety harness.”
Thompson, whose principal place of business is in Utah, moved to
dismiss the complaint for lack of personal jurisdiction. After about
a year of jurisdictional discovery, the court granted Thompson’s
motion and dismissed it from the case. The Kuhars then initiated
the present action in Utah, asserting claims of design defect, breach
of warranties, negligence, and loss of consortium.
    ¶9 Meanwhile, in the New Jersey case, the Kuhars disclosed
the report of their liability expert, Dr. Richard Lynch. Dr. Lynch
opined that “the bolt would not have failed if not for the presence
of two design defects and one manufacturing defect.” Two of the
remaining defendants filed motions to preclude Dr. Lynch’s report
and testimony. The court granted the motion, concluding that
Dr. Lynch’s report was inadmissible under Federal Rule of
Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals Inc., 509
U.S. 579 (1993). The court determined that the report was
unreliable, consisted of Dr. Lynch’s “subjective belief or
unsupported speculation,” did not rely on scientific methods and
procedures, was based on improper net opinions1 and bald
assertions, did not lay the proper foundation, “merely [told] the
jury what result to reach,” and did not contain sufficient
quantitative data.
   ¶10 After successfully excluding the expert’s testimony, the
remaining defendants in the New Jersey case moved for summary
judgment. The court granted the defendants’ motions, concluding
 __________________________________________________________
   1 A net opinion is an opinion that contains “bare conclusions,

unsupported by factual evidence.” Kuhar v. Petzl Co., Civ. No. 16-
0395 (JBS) (JS), 2018 WL 7571319, at *4 (D.N.J. Nov. 27, 2018)
(quoting Worrell v. Elliot, 799 F. Supp. 2d 343, 349 (D.N.J. 2011)).

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              KUHAR v. THOMPSON MANUFACTURING
                       Opinion of the Court

that expert testimony was required for the Kuhars to establish their
design defect claim and “[they] ha[d] none.” Specifically, the court
determined that the micrograb and bolt were “complex
instrumentalities” under New Jersey law, meaning that “without
the assistance of an expert[,] a jury is not able to adequately
understand the relevant design considerations involved with [the]
bolt and micrograb.” The United States Court of Appeals for the
Third Circuit affirmed the district court’s decision.
    ¶11 After learning of the summary judgment ruling in New
Jersey, Thompson moved for summary judgment in the instant
case. It argued that because the New Jersey federal court had
determined that the harness was not defective, the Kuhars should
be precluded from relitigating that issue here. The district court
ultimately agreed with Thompson and granted summary judgment
in its favor. The Kuhars appealed.
   ¶12 The court of appeals reversed the district court’s decision.
Kuhar v. Thompson Mfg. Inc., 2022 UT App 22, ¶ 1, 506 P.3d 1200.
Applying Utah law, the court of appeals used the issue preclusion
standard set out in Buckner v. Kennard, 2004 UT 78, 99 P.3d 842. See
Kuhar, 2022 UT App 22, ¶ 9. Buckner states that to invoke issue
preclusion, a party must prove that:
      (1) the issue decided in the prior adjudication is
      identical to the one presented in the instant action;
      (2) the party against whom issue preclusion is
      asserted was a party, or in privity with a party, to the
      prior adjudication; (3) the issue in the first action was
      completely, fully, and fairly litigated; and (4) the first
      suit resulted in a final judgment on the merits.
2004 UT 78, ¶ 13. The court of appeals concluded that Thompson
could not establish the first and third elements. See Kuhar, 2022 UT
App 22, ¶ 9. Specifically, the court reasoned that the issue
Thompson seeks to preclude here—whether the harness was
defective—is not identical to the issue that was actually decided in
New Jersey. Id. ¶¶ 10, 12. The court concluded that the New Jersey
court had decided only that the Kuhars’ expert evidence was
inadmissible, and they needed an expert to prove their claims. Id.
¶ 10. Consequently, the court of appeals held that the question of
whether the harness was defective had not been decided or fully
litigated in the New Jersey case. Id. ¶ 13.
   ¶13 Thompson petitioned for certiorari, and we granted its
petition. We have jurisdiction under Utah Code subsection 78A-3-
102(3)(a).
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                    STANDARD OF REVIEW
    ¶14 “On certiorari, we review the court of appeals’ decision for
correctness, focusing on whether that court correctly reviewed the
trial court’s decision under the appropriate standard of review.”
State v. Rushton, 2017 UT 21, ¶ 9, 395 P.3d 92 (cleaned up). Whether
issue preclusion bars litigation in a subsequent action is a question
of law that is reviewed for correctness on appeal. Macris & Assocs.,
Inc. v. Neways, Inc., 2000 UT 93, ¶ 17, 16 P.3d 1214.
                            ANALYSIS
   ¶15 The question before us is whether the doctrine of issue
preclusion bars the Kuhars from litigating the defectiveness of the
harness in the instant case. Before addressing this question,
however, we must first ascertain which forum’s law is controlling.
Because the previous case was litigated in New Jersey federal court,
federal law governs the preclusive effect of that judgment. And
where, as here, a federal court exercises diversity jurisdiction,
federal law dictates that the law of the state in which the federal
court sits controls. Accordingly, we conclude that New Jersey law
governs the question before us.
    ¶16 Applying New Jersey law, we conclude that the elements
of issue preclusion are satisfied here. We therefore reverse.
 I. NEW JERSEY LAW GOVERNS THE ISSUE-PRECLUSIVE EFFECT OF THE
                   FEDERAL COURT’S DECISION
      ¶17 The parties dispute which law should govern the question
before us. The court of appeals applied Utah law, observing that
“no party assert[ed] that [the court] should apply New Jersey law
. . . . And in any event, no suggestion has been made that New
Jersey law and Utah law differ in application.” Kuhar v. Thompson
Mfg. Inc., 2022 UT App 22, ¶ 9 n.1, 506 P.3d 1200. On certiorari,
Thompson asserts that federal common law applies. The Kuhars,
on the other hand, argue that the court of appeals was correct in
applying Utah law because “there is no discernible difference
between Utah and federal common law on issue preclusion.”
   ¶18 We clarify that New Jersey law governs the question
before us, and we apply it in our analysis.2 To make this
__________________________________________________________
    2 The court of appeals was right that the rules governing issue

preclusion in Utah and New Jersey are similar. Compare Buckner v.
Kennard, 2004 UT 78, ¶ 13, 99 P.3d 842, with First Union Nat’l Bank
v. Penn Salem Marina, Inc., 921 A.2d 417, 424 (N.J. 2007). And we
                                                     (continued . . .)
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               KUHAR v. THOMPSON MANUFACTURING
                        Opinion of the Court

determination, we first turn to federal common law, which applies
“when deciding if a federal court’s decision has preclusive effect on
a subsequent state court proceeding.” Oman v. Davis Sch. Dist., 2008
UT 70, ¶ 28 n.5, 194 P.3d 956; see also Taylor v. Sturgell, 553 U.S. 880,
891 (2008) (“The preclusive effect of a federal-court judgment is
determined by federal common law.”). However, this does not end
the choice-of-law analysis because federal common law
incorporates different substantive rules depending on the type of
jurisdiction exercised by the federal court.
   ¶19 The United States Supreme Court has not spoken
definitively about which law governs the issue-preclusive effect of
a decision of a federal court exercising diversity jurisdiction.3 But
the Court has directly answered the choice-of-law question in the
context of claim preclusion, which provides guidance here. “In
brief, claim preclusion applies to all claims growing out of the same
facts that could have been brought, but issue preclusion applies
only to those issues that were actually litigated and decided.”
Watkins v. Resorts Int’l Hotel & Casino, Inc., 591 A.2d 592, 604 (1991).
The Court has held that where a federal court exercises federal
question jurisdiction,4 federal law requires subsequent courts to
 __________________________________________________________
recognize that we have opted to apply Utah law in the past in such
circumstances. See, e.g., Oman v. Davis Sch. Dist., 2008 UT 70, ¶ 28
n.5, 194 P.3d 956. But here, we provide guidance on the correct
choice-of-law analysis in cases involving the issue-preclusive effect
of the judgment of a federal court exercising diversity jurisdiction,
because the potential sources of law in such cases may not always
be similar to Utah’s, and the jurisprudence in this area is not
definitively settled.
   3 Diversity jurisdiction is a form of subject matter jurisdiction

that allows federal district courts to have original jurisdiction over
civil actions that (1) “involv[e] parties who are citizens of different
states” and (2) have “an amount in controversy greater than a
statutory minimum.” Diversity jurisdiction, BLACK’S LAW
DICTIONARY (11th ed. 2019). For the specific requirements of federal
diversity jurisdiction, see United States Code title 28, section 1332.
   4  Federal question jurisdiction is a form of subject matter
jurisdiction that allows federal district courts to have original
jurisdiction “over claims arising under the U.S. Constitution, an act
of Congress, or a treaty.” Federal-question jurisdiction, BLACK’S LAW
DICTIONARY (11th ed. 2019). For the specific requirements of federal
question jurisdiction, see United States Code title 28, section 1331.

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apply federal common law to determine the claim-preclusive effect
of the federal judgment. See, e.g., Heck v. Humphrey, 512 U.S. 477,
488 n.9 (1994); cf. Haik v. Salt Lake City Corp., 2017 UT 14, ¶ 8, 393
P.3d 285 (recognizing Heck’s holding). Then, in Semtek International
Inc. v. Lockheed Martin Corp., the Court held that when a federal
court sits in diversity, the law of the state in which the federal court
sits governs the claim-preclusive effect of the federal judgment. 531
U.S. 497, 508 (2001); cf. Haik, 2017 UT 14, ¶ 8 (recognizing Semtek’s
holding). In reaching its decision in Semtek, the Court reasoned that
basing the applicable claim-preclusion law on the type of jurisdiction
exercised by the federal court would prevent “forum-shopping and
inequitable administration of the laws.” 531 U.S. at 508–09 (cleaned
up). As these cases involve only claim preclusion, many courts have
grappled with whether to extend the Court’s analysis in these cases
to the issue preclusion context.
    ¶20 We ultimately conclude that the best approach is to do so,
for two reasons. First, in Taylor v. Sturgell, which was decided after
Semtek, the U.S. Supreme Court stated broadly that “[t]he
preclusive effect of a federal-court judgment is determined by
federal common law.” 553 U.S. at 891. Although Taylor involved
only claim preclusion, the Court engaged in a general discussion of
both claim and issue preclusion. See id. at 891–93. And in stating
that federal common law governs the preclusive effect of federal
court judgments, the Court did not distinguish between issue and
claim preclusion. See id. at 891. So, while Taylor is not dispositive as
to issue preclusion, it at least suggests that the Court sees no
distinction between the choice-of-law analyses for the two doctrines.
Second, the rationale underlying the Semtek decision—the
prevention of forum shopping and inequitable administration of the
laws—applies equally in the issue preclusion context. Accordingly,
we join other state and federal courts in concluding that the Semtek
claim preclusion rule applies to issue preclusion as well.5

 __________________________________________________________
   5 For examples of state courts extending the claim preclusion

choice-of-law analysis to issue preclusion, see Garcia v. Prudential
Insurance Co. of America, 293 P.3d 869, 872 (Nev. 2013) (reasoning
that Semtek applied to issue preclusion because Taylor discussed
Semtek “in light of issues regarding both claim and issue
preclusion”), and Marshall v. Inn on Madeline Island, 631 N.W.2d 113,
120–21 (Minn. Ct. App. 2001) (extending the Semtek rule to issue
preclusion claims because “the Semtek holding rests on the
constitutional obligation of state courts to respect federal
                                                       (continued . . .)
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               KUHAR v. THOMPSON MANUFACTURING
                         Opinion of the Court

    ¶21 Under Semtek, when a federal court sits in diversity, the law
of the state in which the federal court sits governs the preclusive
effect of its judgments. 531 U.S. at 508; see also Taylor, 553 U.S. at 891
n.4. In this case, the federal court exercising diversity jurisdiction sat
in New Jersey. Accordingly, we conclude that New Jersey’s
jurisprudence on issue preclusion governs the question before us.
    II. THE ELEMENTS OF ISSUE PRECLUSION ARE SATISFIED HERE
    ¶22 Applying New Jersey law, we conclude that the elements of
issue preclusion are met here. Issue preclusion bars relitigation of
“issue[s] of fact or law,” First Union Nat’l Bank v. Penn Salem Marina,
Inc., 921 A.2d 417, 423 (N.J. 2007), and “applies only to those issues
that were actually litigated and decided,” Watkins v. Resorts Int’l
Hotel & Casino, Inc., 591 A.2d 592, 604 (N.J. 1991) (cleaned up).
   ¶23 However, issue preclusion does not bar relitigation of
“every fact which may have been litigated in the prior action.”
Mazzilli v. Accident & Cas. Ins. Co., 139 A.2d 741, 746 (N.J. 1958).
Instead, it applies only to “matters or facts which were directly in
issue,” not matters or facts that were “merely collateral or
incidental” to the judgment. Id.
   ¶24 Under New Jersey law, to establish issue preclusion,
       the party asserting the bar must show that: (1) the
       issue to be precluded is identical to the issue decided
       in the prior proceeding; (2) the issue was actually
       litigated in the prior proceeding; (3) the court in the
       prior proceeding issued a final judgment on the
       merits; (4) the determination of the issue was
       essential to the prior judgment; and (5) the party
       against whom the doctrine is asserted was a party to
       or in privity with a party to the earlier proceeding.
First Union Nat’l Bank, 921 A.2d at 424 (cleaned up).
   ¶25 The parties do not dispute that the third, fourth, and fifth
elements of issue preclusion are met here. The New Jersey federal

 __________________________________________________________
judgments” and “federalism principles apply equally to claim
preclusion and issue preclusion”). For examples of federal courts
extending the claim preclusion choice-of-law analysis to issue
preclusion, see Taco Bell Corp. v. TBWA Chiat/Day Inc., 552 F.3d 1137,
1144–46 (9th Cir. 2009), NAS Electronics, Inc. v. Transtech Electronics
PTE Ltd., 262 F. Supp. 2d 134, 143–45 (S.D.N.Y. 2003), and Cannon v.
Armstrong Containers Inc., 92 F.4th 688, 706 (7th Cir. 2024).

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court issued a final judgment on the merits. Whether the harness
was defective was essential to the judgment in New Jersey. And the
parties against whom Thompson asserts the doctrine, the Kuhars,
were parties to the earlier proceeding.
    ¶26 But the court of appeals held that Thompson could not
establish what New Jersey law identifies as the first and second
elements of the test—that the issue Thompson seeks to preclude is
identical to an issue decided in the New Jersey case and that the
issue was actually litigated in that case. See Kuhar v. Thompson Mfg.
Inc., 2022 UT App 22, ¶ 16, 506 P.3d 1200. As noted, the issue
Thompson seeks to preclude the Kuhars from litigating is whether
the harness was defective. And the court of appeals concluded that
whether the harness was defective is “not the same” as “the issues
actually decided in the New Jersey litigation.” Id. ¶ 10. The court of
appeals reasoned that the only issues decided by the New Jersey
court were “(1) that a particular expert’s testimony, proffered by
the Kuhars, was inadmissible under rule 702 of the Federal Rules
of Evidence and applicable federal case law” and “(2) that without
that expert’s testimony, under New Jersey law the Kuhars could
not satisfy their burden of establishing their product liability
claims.” Id. On this basis, the court of appeals concluded that the
New Jersey court had not determined on the merits whether the
harness was defective. Id. ¶ 12.
   ¶27 We come down differently on this analysis. To determine
whether the issue Thompson seeks to preclude is identical to the
issue decided in New Jersey, we must first identify what was
decided in that case. The parties do not dispute that the issue of
whether the harness was defective was present, in identical form,
in the New Jersey case. After all, both cases involve the same
incident, the same harness, and substantively similar claims that
depend upon the Kuhars proving that the harness was defective.
   ¶28 The harder question is whether this issue was decided in
the New Jersey litigation. The court of appeals concluded that in
the New Jersey court’s summary judgment order dismissing the
Kuhars’ claims against the remaining defendants, that court “never
grappled with the merits” of whether the harness was defective. Id.
Instead, “it decided the case against the Kuhars not because it made
a factual determination that the product was not defective but
because it determined that the Kuhars could not satisfy their
burden of proof on that point without expert testimony.” Id.
   ¶29 But generally, a summary judgment ruling that plaintiffs
have not met their burden of proof functions as a determination on

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              KUHAR v. THOMPSON MANUFACTURING
                       Opinion of the Court

the merits. The relevant section of the Restatement of Judgments,
which New Jersey has adopted, discusses when an issue has been
decided. See Olivieri v. Y.M.F. Carpet, Inc., 897 A.2d 1003, 1009–11
(N.J. 2006) (recognizing and adopting the general rule and
exceptions for issue preclusion as set forth in sections 27 and 28 of
the Restatement (Second) of Judgments); see also Barker v. Brinegar,
788 A.2d 834, 839–40 (N.J. Super. Ct. App. Div. 2002) (“New Jersey
courts follow the doctrine of collateral estoppel or the rule of issue
preclusion described in the Restatement of Judgments.” (cleaned
up)). That Restatement section explains that “[a] determination
may be based on a failure of pleading or of proof as well as on the
sustaining of the burden of proof.” RESTATEMENT (SECOND) OF
JUDGMENTS § 27 cmt. d (AM. L. INST. 1982); see also Allesandra v.
Gross, 453 A.2d 904, 909–10 (N.J. Super. Ct. App. Div. 1982)
(quoting and applying the same).
   ¶30 And we read the New Jersey court’s summary judgment
order to function in such a manner. When that court ruled that the
Kuhars could not proceed with their design defect claims without
expert evidence, it effectively determined that the Kuhars had not
met their burden to prove the existence of a design defect. And a
merits determination “may be based on a failure . . . of proof.” Id.
   ¶31 But we can understand why the court of appeals viewed the
New Jersey ruling differently. In its order, the New Jersey court used
narrow language when describing its decision, which seemed to
draw a distinction between a dismissal based on a failure of proof
and a dismissal based on the lack of an expert. The court explained,
       Defendants make two arguments in relation to [the
       Kuhars’ design defect theory]: (1) [the Kuhars] cannot
       make a prima facie case for design defect, therefore,
       defendants’ summary judgment motions should be
       granted; and (2) [the Kuhars’] claims are not
       supported by expert testimony, therefore, summary
       judgment should be granted. The Court finds
       defendants’ first argument need not be addressed because
       the second argument disposes of all design defect claims
       against all defendants. In short, [the Kuhars] cannot
       pursue a design defect theory against defendants
       without supporting expert testimony.
Kuhar v. Petzl Co., Civ. No. 16-0395 (RMB) (JS), 2019 WL 6211544, at
*4 (D.N.J. Oct. 21, 2019) (emphasis added), report and
recommendation adopted, 2019 WL 6130741 (D.N.J. Nov. 19, 2019).

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    ¶32 But the court went on to conclude that, based on the lack
of an expert, the Kuhars could not “make a prima facie case of
design defect.” Id. at *5. While some of the court’s language seemed
to narrow its reasoning to more technical grounds, we ultimately
conclude that the court’s grant of summary judgment based on a
failure of proof functioned as a merits determination that the
Kuhars could not show the harness was defective. See RESTATEMENT
(SECOND) OF JUDGMENTS § 27 cmt. d (AM. L. INST. 1982).
    ¶33 Turning to the second element of issue preclusion, the
court of appeals held that the existence of a design defect had not
been fully litigated because the New Jersey court did not “hold[] a
trial to weigh the evidence and make a finding as to the alleged
defective nature of the product—because it determined that the
Kuhars’ overarching claim failed on what amounted to a
procedural ground.” Kuhar, 2022 UT App 22, ¶ 13. Thus, the court of
appeals characterized the New Jersey court’s summary judgment
ruling as being premised on “nonmerits procedural grounds” akin
to striking a party’s answer as a sanction for discovery abuses or
“because a party fails to appear at a hearing.” Id. ¶ 14.
    ¶34 Although the Kuhars’ case did not proceed to trial in New
Jersey, we conclude that the existence of a design defect was
actually litigated there. An issue is actually litigated when it “is
properly raised, by the pleadings or otherwise, and is submitted for
determination, and is determined.” RESTATEMENT (SECOND) OF
JUDGMENTS § 27 cmt. d (AM. L. INST. 1982). Importantly, the relevant
section of the Restatement clarifies that an issue may be considered
“submitted and determined” based on a
      motion to dismiss for failure to state a claim, a motion
      for judgment on the pleadings, a motion for summary
      judgment . . . , a motion for directed verdict, or their
      equivalents, as well as on a judgment entered on a
      verdict. A determination may be based on a failure of
      pleading or of proof as well as on the sustaining of
      the burden of proof.
Id.
    ¶35 It is not disputed that the Kuhars raised the issue that the
harness was defective through the claims in their pleadings. The
New Jersey litigants then conducted discovery, and the Kuhars had
the opportunity to gather evidence to prove there were defects in
the harness. They selected an expert, Dr. Lynch, to help them make
this showing.

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               KUHAR v. THOMPSON MANUFACTURING
                        Opinion of the Court

    ¶36 The defendants then submitted the issue for determination
in motions to exclude and for summary judgment. First, some of
the defendants moved to exclude the Kuhars’ expert report. And
the evidence did not hold up. The federal court found that
“Dr. Lynch’s report and the opinions contained therein leave too
large a gap between the data presented and the conclusions
rendered, and consequently, it fails to satisfy Daubert’s reliability
and fit requirements.” Kuhar v. Petzl Co., Civ. No. 16-0395 (JBS) (JS),
2018 WL 7571319, at *4 (D.N.J. Nov. 27, 2018). So the court excluded
it entirely. Then, in ruling on the summary judgment motions, the
court concluded that without any expert evidence, the Kuhars
could not prove their design defect claims. And as we have
explained, a dismissal based on a failure of proof is a form of
merits determination.
    ¶37 In light of this, we conclude that in the New Jersey
litigation, the issue of whether the harness was defective was
raised, submitted for determination, and determined. Thus, the
issue was actually litigated in New Jersey.
   ¶38 Accordingly, because the other elements of issue
preclusion are not in dispute, we conclude that the elements of
issue preclusion are met here.
                          CONCLUSION
   ¶39 Federal law governs the issue-preclusive effect of a federal
court decision. In cases like this one, where a federal court exercises
diversity jurisdiction, we conclude that federal law dictates that the
substantive issue-preclusion jurisprudence of the state in which the
federal court sits controls. Here, that was New Jersey.
   ¶40 Applying New Jersey law, we conclude that Thompson
has satisfied the elements of issue preclusion. Specifically, we
conclude that the issue of whether the harness was defective was
actually litigated and decided in the New Jersey federal case. And
as the other elements of issue preclusion are not in dispute, we
reverse.

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