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9. Is the court likely to preclude the car manufacturer from litigating the merits of the teacher's negligence claim?
Shortly thereafter, the court issued a default judgment against the manufacturer. After the default judgment was entered, a teacher filed suit against the same manufacturer in federal court in State B. The teacher sought damages on the same negligence theory put forward in the accountant's lawsuit against the manufacturer.
An accountant properly filed a diversity lawsuit against a car manufacturer in State A federal court. The accountant sought compensation under a negligence claim for damages he suffered when the ignition of his car malfunctioned. After the accountant obtained many documents and emails through discovery indicating the manufacturer's longstanding awareness of ignition problems, the manufacturer stopped participating in the litigation.
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For issue preclusion to apply:
(i) the judgment must have been final;
(ii) the issue actually litigated; AND
(iii) it must have been essential to the judgment.
Unlike claim preclusion, a full trial on the merits is almost always necessary to satisfy the «actually litigated» requirement.
D is correct. Issue preclusion applies when a judgment binds the plaintiff or defendant in subsequent actions on different causes of action between them as to issues actually litigated and essential to the judgment in the first action.
Here, there will not be issue preclusion because the issue of the car manufacturer's negligence was not litigated and determined in the first case. Rather, the court issued a default judgment against the car manufacturer.
A is incorrect. Issue preclusion may only apply to issues actually litigated and determined in a previous lawsuit. Here, because the car manufacturer stopped responding in the accountant's suit, issue preclusion does not apply because the issues were not actually litigated.
B is incorrect. The car manufacturer will not be precluded from litigating this issue, regardless of whether non-mutual offensive issue preclusion would be constitutional on these facts.
C is incorrect. The car manufacturer will not be issue-precluded, regardless of whether State A law permits non-mutual offensive issue preclusion, because there is no issue preclusion on these facts for reasons apart from non-mutuality.