Collateral estoppel, also known as issue preclusion, bars the re-litigation of identical issues of fact or law decided in a prior suit. It applies when the party against whom it is asserted had a full and fair opportunity to litigate the issue in the prior suit.
Offensive and Defensive Use
Collateral estoppel can be applied offensively or defensively. Offensive collateral estoppel is used by a plaintiff seeking to estop a defendant from relitigating an issue that the defendant previously litigated and lost in a suit involving another party. Defensive use of collateral estoppel is the opposite—that is, the defendant asserts collateral estoppel as an affirmative defense because the plaintiff previously litigated the issue and lost.
The Elements of Collateral Estoppel
A party seeking to assert the bar of collateral estoppel must establish that (1) the issue of fact or law sought to be litigated in the second action was fully and fairly litigated in the first action, (2) those issues were essential to the judgment in the first action, and (3) the party against whom the doctrine is asserted was a party or was in privity with a party in the first action.
What is the Purpose of Collateral Estoppel?
Issue preclusion is designed to promote judicial efficiency, protect parties from multiple lawsuits, and prevent inconsistent judgments by preventing any relitigation of an ultimate issue of fact.
More specifically, the doctrine extends only to those matters [issues] that were either expressly determined or necessarily determined in an adjudication and not to those matters which might have been, but were not, raised and adjudicated therein.
Collateral Estoppel is a Question of Law
Whether issue preclusion applies is a question of law for the court to decide.
Mutuality of Parties
Applying collateral estoppel to close the courthouse door to a litigant who was not a party to the prior proceeding raises due process concerns. The rule has exceptions, however, and Texas courts have held that, consistent with federal law, preclusion can apply so long as the party against whom collateral estoppel is asserted was either a party or was in privity with a party in the first action. Due process requires that collateral estoppel only be applied against litigants who have had their day in court either as a party to the prior suit or as a privy.
That is, strict mutuality of the parties is not required. It is only necessary that the party against whom collateral estoppel is being asserted was a party or in privity with a party in the first action.
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 Privity connotes those who are in law so connected with a party to a judgment as to have such an identity of interest that the party to the judgment represented the same legal right. The Supreme Court of Texas has stated that there is not a specific definition of privity that can be applied generally to all preclusion cases; instead, the circumstances of each case must be carefully examined. Generally, “privity” exists if: (1) a nonparty agrees to be bound by the determination of issues in an action between others; (2) a pre-existing substantive legal relationship governs a nonparty and a party to a judgment; (3) a party with the same interests adequately represents a nonparty in a prior action; (4) a nonparty assumes control over the litigation in the prior action; (5) a nonparty serves as proxy for a party to a prior action; or (6) a special statutory scheme expressly forecloses successive litigation by nonlitigants and claim preclusion is otherwise consistent with due process.