Res Judicata, Estoppel, Claim, and Issue Preclusion

I often talk about the advantages of pushing a debt defense to the point where the debt collector dismisses the case “with prejudice.” What is this advantage and why is it so important? It has to do with something called “res judicata” or “claim preclusion.” It is important for pro se litigants to understand these and other equitable concepts, including the doctrines of unclean hands and laches.

Estoppel

Very basically, “estoppel” means “prevention.” You can be estopped from doing lots of things for lots of reasons, but the issue tends to come up in mainly two ways: estoppel for some sort of moral reason; or “collateral estoppel” (also known as “issue preclusion”). These are “equitable” issues that exist apart from any actual statutes (laws) that may also apply.

Equity

In ancient English law (which is the basis of American law), people sometimes regarded the concepts of the law as unchangeable. If the law provided that a son would inherit from his father upon his father’s death, for example, then that legal right would attach no matter how the father’s death occurred. As you might imagine, allowing that idea its full sway could lead to some surprising, and very morally wrong, results. As a result, the doctrine of “Equity” was born. And equity simply means that the court, as an extension of moral order, could not allow itself to be an instument of evil purposes and that it also had a right to protect its efficiency or the power of its rulings.

Unclean Hands, Laches, and other morality-based reasons for Estoppel

“Unclean hands” means you’re asking the court to do something to lock in an advantage you obtained immorally. So, for example, you may have heard that if you kill someone you are not allowed to inherit from them. An example from debt law would be that, if you prevent someone from paying, you might be estopped from suing them for non-payment. It comes up a lot in mortgage foreclosure. For more, look at: Using the Defense of Unclean Hands in Debt Litigation.

“Laches” is also a morality-based defense, but in this case it involves delay. What laches requires is an “unreasonable” delay during which some event harmful to the defendant’s ability to defend himself or herself occurs. The defense is even more powerful if the harmful event is somehow known or expected by the plaintiff. If the delay is unreasonable and your bank burns down, destroying proof of payment of a debt, for example, this might create a defense of laches. A debt collector purchasing a debt and then waiting till the original creditor destroyed its records of the account would be even more powerful.

Notice that laches is different than statute of limitations. Statutes of limitations are legally determined time limits (and are themselves subject to equity-based attack). Statutes of limitations do not depend upon “unreasonable” delay, damage to the defense, or other equitable considerations. They are designed (by laws passed by legislatures) to allow time to bring finality, eventually, so that people can make plans – eventually – without being haunted by their alleged wrongs forever.

Equitable defenses are “affirmative” defenses – you must plead and prove them. In most states that means that you must plead the facts constituting the entire defense in your Answer as an affirmative defense. And they can be attacked by motion to dismiss.

Doctrines of finality

Collateral estoppel (now generally called “issue preclusion”) and res judicata (“claim preclusions”) are court-administered doctrines of “finality.”Basically the rule is that, where a court had a right to decide an issue (it was of “competent” jurisdiction), the parties (or people whose right depends on the rights of the parties – this is called “being in privity”) are precluded (prevented) from relitigating it.

Issue preclusion and claim preclusion are slightly different from each other. Issue preclusion depends on the court having considered a specific legal issue and actually deciding it one way or the other. It doesn’t have to have done so explicitly, however – if the ruling was necessarily decided as part of another issue or ruling – that is, if the only way a court could have ruled about some other issue was to have believed a certain, disputed, set of facts, then the issue will probably be precluded, and the two parties must accept that ruling and that determination of the facts (although they could appeal it, of course). If, for example, you attack a debt collection proceeding based on the debt collector’s suing you before verifying the debt, you may be able to get the case dismissed on that basis. The question of whether the debt collector is a debt collector would then be precluded if you later sued it for violation of the Fair Debt Collection Practices Act (FDCPA). This keeps the parties from fighting about the same legal issues over and over.

The purpose of claim preclusion is to require the parties to bring all the claims they are supposed to in one lawsuit. This allows the court to consider all the facts and all the rights, and come up with one, final resolution to the entire conflict. A classic example of that would be conflicting claims coming out of an automobile accident. If two people are sued in the same car crash, and one brings suit (in a court with “competent” jurisdiction to hear the case), then the other must defend and bring a counterclaim for her injuries that happened in the same crash. There are fine points of this rule, and different terms for some of them, but in general claim preclusion will prevent further litigation of any claim that was, or should have been, made in the first suit.

In debt law, the question is whether you must bring a counterclaim under the FDCPA or risk losing it to claim preclusion. In general, the answer to that is no – you can bring it in a separate action. But if you bring one claim under the FDCPA, you probably have to bring all of them – you cannot safely try to divide your claims against the other side.

Note that the affirmative defense example above, where you sought verification and they brought suit without verifying, straddles this line. Could you get the case dismissed without creating claim preclusion issues for your later suit under the FDCPA? Probably. But if you sought damages or other remedies under the FDCPA as part of this defense, you might be crossing the line. They write law school tests about questions like that, and it is one reason I always preferred to bring all counterclaims and defenses in the defense when I was practicing.

Conclusion

Courts have a number of social policies that control what they do, but there are two main policies you must consider: justice and finality. I have spoken elsewhere of the policy of deciding cases “on the merits” (based on real justice) rather than “technicalities,” and this, for example, is why motions to vacate defaults often work. But on the other hand is “finality” – the desire of courts to save their own resources and to have an end to litigating over past events and certainty going into the future. It is important to be aware of how the courts balance these two, opposing, goals.