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2. Should the court grant the university's motion?
Neither State A nor State B permits nonmutual issue preclusion.
The individual investor's suit proceeded to trial. The state court ruled that the company's offering materials contained false information and awarded the investor a $25,000 judgment. The university immediately moved for partial summary judgment in its federal action against the company, arguing that the state court judgment bound the federal court on the issue of whether the company's offering materials contained false information.
A university that had purchased the company's stock through the same offering sued the company in federal court in State B, claiming that the offering materials violated federal securities laws and seeking $1 million in damages.
An individual investor purchased stock through a company's stock offering. When the price of the stock plummeted, the investor sued the company in a state court in State A, claiming that the company's offering materials had fraudulently induced him to purchase the stock and seeking $25,000 in damages.
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A is correct. In this question, the first case was decided in state court in State A. Therefore, the second court, the federal court in State B, must use the issue preclusion rules of State A which decided the first case. State A does not permit nonmutual issue preclusion. Therefore, the university in the second case is precluded from using the first judgment offensively against the company.
B is incorrect. This is the correct conclusion, but incorrect reasoning. When the first case was decided in a state court, the second court, even if a federal court, should apply the preclusion rules of the first court. Therefore, in this case, the federal court sitting in State B should apply State A law, not State B law.
C is incorrect. While it is true that federal law permits the offensive use of nonmutual issue preclusion, i.e., issue preclusion, in this case, the court must apply the preclusion rules of State A, not the federal rules.
D is incorrect. It is true that an issue must be actually litigated and necessarily decided for issue preclusion to apply. However, that is not the only requirement. In this case, the court hearing the second case must apply State A preclusion rules. Therefore, the offensive use of nonmutual issue preclusion is not permitted here.