UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION
November 16, 1995
ZIP DEE, INC., Plaintiff,
DOMETIC CORPORATION, Defendant.
The opinion of the court was delivered by: SHADUR
MEMORANDUM OPINION AND ORDER
Like the mythical Hydra, Dometic Corporation ("Dometic") seeks to grow two figurative heads in place of each one of its heads of legal argument that gets lopped off from time to time in the course of this lawsuit.
It is time to cauterize, and thus to kill permanently, Dometic's most recent attempted renewal--its currently tendered "Renewed Motion To Narrow the Issues Pursuant to Fed.R.Civ.P. 16 Based on Patent Invalidity."
This Court's April 17, 1995 memorandum opinion and order (the "April Opinion") denied without prejudice Dometic's then-pending motion to narrow the issues by rejecting on grounds of invalidity the patent infringement claim brought against Dometic by Zip Dee, Inc. ("Zip Dee")--a proposed narrowing based on Zip Dee's asserted failure to have complied with the on-sale and public-use provisions of the patent statute. Now Dometic wants to renew that motion, seeking to take heart from this Court's holding in its May 19, 1995 memorandum opinion and order (the "May Opinion," 886 F. Supp. 1427).
In the May Opinion this Court dealt with the effect, in terms of claim-preclusion and issue-preclusion considerations, of the prior litigation between Zip Dee and Dometic's predecessor A&E Systems, Inc. ("A&E") (see May Opinion at 1430) on Zip Dee's trademark claims in the current litigation. For the reasons stated there (May Opinion at 1432-35), this Court determined in part that Dometic's post-judgment sales of allegedly infringing products gave rise to a new trademark infringement claim for claim-preclusion purposes.
If that is so, now says Dometic, then the doctrine of claim preclusion also cannot apply to foreclose its ability to advance any defenses that its predecessor did not assert in that same prior litigation between Zip Dee and A&E. And because the proposed on-sale and public-use defenses to Zip Dee's patent infringement claims were not litigated in that earlier lawsuit, Dometic concludes that it is free to press those defenses now.
That line of "analysis" is strongly counterintuitive, so much so that it would seem potentially persuasive only to an audience whose thought processes had been paralyzed from overexposure to the sometimes illogical nature of legal reasoning.
And in this instance well-established legal doctrine squarely supports the intuitive rejection of Dometic's position.
What Dometic does not recognize is that any arguments as to the applicability or effects of claim preclusion vel non are irrelevant, for Dometic's present effort to advance the two defenses in question is barred by issue preclusion. This Court recognizes that May Opinion at 1435 accepted arguendo the litigants' narrow reading of the "issues" concept in the context of the argument that the parties were then addressing,
but Dometic's current effort has caused this Court to examine that issue independently--and to Dometic's total detriment.
Here is the familiar exposition of the issue-preclusion doctrine as expressed in Restatement (Second) of Judgments ("Restatement") § 27 (a section on which, somewhat surprisingly, Dometic attempts to rely in its current motion):
When an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.
Where Dometic runs afoul of both law and logic is in its failure to recognize the distinction between an issue, in the sense employed by the Restatement and by preclusion doctrine generally, and the arguments that a party may advance in its effort to prevail on such an issue. In this instance A&E (and hence, in legal contemplation, its successor Dometic) vigorously litigated, and it lost, the issue of the validity or invalidity of Zip Dee's patent--an issue of law within the express scope of Restatement § 27. It is quite true that the arguments that A&E then brought to bear on that issue were (1) the patent claims' asserted lack of novelty and (2) the patent claims' asserted obviousness in view of the prior art,
and that A&E did not then assert (though of course it could have) the on-sale and public-use arguments that Dometic now wants to trot out. But with Dometic's predecessor having once fought and lost the battle on the issue of the validity of Zip Dee's patent, Dometic is now barred by issue preclusion from waging that battle again with fresh troops.
What has just been said is fundamental to the law of judgments. Dometic's attempted invocation of Restatement § 27 did not read far enough into that section, for the illustrations to which it points are quite beside the mark--instead cmt. c to that section provides far more relevant teaching.
Perhaps the most compelling exposition of the relevant considerations that this Court has been able to locate is the discussion in Yamaha Corp. of Am. v. United States, 295 U.S. App. D.C. 158, 961 F.2d 245 at 245-255 (D.C. Cir. 1992). Because that discussion might well have been written for this case, it is worth quoting at length (citations included but footnote omitted):
The objective of the doctrine of issue preclusion (also known as collateral estoppel) is judicial finality; it fulfills "the purpose for which civil courts have been established, the conclusive resolution of disputes within their jurisdictions." Kremer v. Chemical Constr. Corp., 456 U.S. 461, 467 n. 6, 102 S. Ct. 1883, 1890 n. 6, 72 L. Ed. 2d 262 (1982). The Supreme Court had defined issue preclusion to mean that "once a court has decided an issue of fact or law necessary to its judgment, that decision may preclude relitigation of the issue in a suit on a different cause of action involving a party to the first case." Allen v. McCurry 449 U.S. 90, 94, 101 S. Ct. 411, 414, 66 L. Ed. 2d 308 (1980).
The standards for establishing the preclusive effect of a prior holding are: First, the same issue now being raised must have been contested by the parties and submitted for judicial determination in the prior case. Second, the issue must have been actually and necessarily determined by a court of competent jurisdiction in that prior case. See McLaughlin v. Bradlee, 256 U.S. App. D.C. 119, 803 F.2d 1197, 1201 (D.C.Cir. 1986); RESTATEMENT (SECOND) OF JUDGMENTS § 27 (1982) ("when an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties"). Third, preclusion in the second case must not work a basic unfairness to the party bound by the first determination. An example of such unfairness would be when the losing party clearly lacked an incentive to litigate the point in the first trial, but the stakes of the second trial are of a vastly greater magnitude. See Otherson v. Department of Justice, 228 U.S. App. D.C. 481, 711 F.2d 267, 273 (D.C.Cir. 1983); see also Parklane Hosiery Co. v. Shore, 439 U.S. 322, 330, 99 S. Ct. 645, 651, 58 L. Ed. 2d 552 (1979) (unfairness concern is heightened when plaintiff seeks to use collateral estoppel "offensively" against defendant when plaintiff was not party to prior suit); Blonder-Tongue Labs., Inc. v. University of Ill. Found., 402 U.S. 313, 333, 91 S. Ct. 1434, 1445, 28 L. Ed. 2d 788 (fairness is implicated whenever there is risk that "prior proceedings were seriously defective").
In issue preclusion, it is the prior judgment that matters, not the court's opinion explicating the judgment. "Even in the absence of any opinion a judgment bars relitigation of an issue necessary to the judgment." American Iron & Steel Inst. v. EPA, 280 U.S. App. D.C. 373, 886 F.2d 390, 397 (D.C.Cir. 1989) (emphasis in the original), cert. denied, U.S. , 110 S. Ct. 3237, 111 L. Ed. 2d 748 (1990). Furthermore, once an issue is raised and determined, it is the entire issue that is precluded, not just the particular arguments raised in support of it in the first case. See Securities Indus. Ass'n v. Board of Governors, 283 U.S. App. D.C. 376, 900 F.2d 360, 364 (D.C.Cir. 1990) (plaintiff may not raise new argument in second proceeding even though it was never made in first proceeding; so long as argument could have been made, it is precluded), RESTATEMENT (SECOND) OF JUDGMENTS § 27 cmt. c at 253 (if previously litigated "issue was one of law, new arguments may not be presented to obtain a different determination of that issue"). Preclusion cannot be avoided simply by offering evidence in the second proceeding that could have been admitted, but was not, in the first. CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE: JURISDICTION § 4426 at 141 (1981).
Although that entire discussion is on all fours with the present case, the last paragraph (with its emphasis on a litigant's inability to raise new arguments in support of a once-lost issue of law) is particularly fatal to Dometic's efforts here.
All of this plainly calls for the granting of Dometic's renewed motion to narrow the issues, but with a consequence dramatically opposite to that wished for by Dometic. But before the subject is closed, a brief comment may be in order as to the irrelevance to the present discussion of the decision in Foster v. Hallco Mfg. Co., 947 F.2d 469 (Fed. Cir. 1991), which Dometic would like to enlist to its aid.
There is an obvious critical difference between Foster and this case: In Foster the prior lawsuit had ended in a consent judgment, so that no issue whatever was actually litigated there. Hence Foster's discussion of issue preclusion, after having quoted Restatement § 27, simply went on to state ( id. at 480, citations omitted):
A rationale for the rule of issue preclusion is that once a legal or factual issue has been settled by the court after a trial in which it was fully and fairly litigated that issue should enjoy repose. Such litigated issues may not be relitigated even in an action on a different claim between the parties. Where a judgment between parties is entered by consent prior to trial on any issue, no issue may be said to have been fully, fairly or actually litigated. Thus, the general rule that issue preclusion does not arise from a consent judgment would allow Foster's challenge to validity on a different claim inasmuch as no issue was actually tried and disposed of by a decision of the court in Foster I.
Thus by definition the doctrine of issue preclusion could play no role in determining the effect of the prior Foster litigation on the second lawsuit between the parties. And so the substantive Foster discussion, which was necessarily focused entirely on the claim-preclusive effect of the earlier litigation, has no bearing on the analysis here.
Although the goal of Dometic's proposed revival of its earlier motion is without merit, the motion itself (one seeking to narrow the issues) must ironically be granted. In substantive terms this opinion--by way of parallel to the second Labor of Hercules--has applied a burning brand as well as a sword to Dometic's contention, and that contention will not be allowed to raise its head again. Dometic is foreclosed from attacking the validity of Zip Dee's patent based on its arguments that Zip Dee has violated the on-sale and public-use provisions of the patent statute.
Milton I. Shadur
Senior United States District Judge
Date: November 16, 1995
As stated in the body of this opinion, before the May Opinion was written this Court had directed the parties to address the possible applicability of issue-preclusion principles to the trademark claims then under discussion (counsel had initially briefed only the subject of claim preclusion). When the parties then responded, this Court simply accepted for purposes of discussion the manner in which their supplemental memoranda had described the "issues" that had been decided in the Zip Dee-A&E litigation.
That treatment of the concept was a narrow one. Indeed, May Opinion at 1436 quoted this excerpt from a footnote in Dometic's supplemental memorandum:
Where some aspect of patent or trademark "validity" is addressed in an antecedent litigation, the "issue," for preclusion purposes, is not the broad concept of invalidity .... The particular basis for challenging validity which was actually litigated and "directly determined" will control the scope of the issues that are subject to preclusion.
Interestingly, at that time this Court viewed that characterization as a concession on Dometic's part--May Opinion at 1436 described Dometic as "the party with the most to gain from an expansive notion of issue preclusion." But the scales have now fallen from this Court's eyes--it is apparent that Dometic had bigger game in its sights all along, for that inappropriately narrow labeling of the relevant "issues" served Dometic's larger purpose of being able to attack Zip Dee's patent on the basis of arguments that could have and should have been made the first time around ( Yamaha, 961 F.2d at 254)--but were not.
Again, this Court has been required for the first time to cast an independent eye on the issue of what constitutes an "issue." It rejects the crabbed characterization that had been advanced in the litigants' submissions leading to the May Opinion. It should however be added that the different (and proper) perspective that has been adopted here makes no difference whatever to the analysis or the conclusions reached in that earlier opinion.