Collateral estoppel and res judicata are similar affirmative defenses to legal claims for relief. Each depends on a prior final judgment. But there are important differences.

Collateral estoppel

The doctrine of collateral estoppel holds that an issue that has been litigated cannot be litigated again. For collateral estoppel to apply, the following requirements must be met:

• The issue in the first and second case are the same;
• The party against whom the doctrine is invoked had the full opportunity to litigate the issue;
• That party actually litigated the issue;
• The issue litigated must have been necessary to the final judgment.

An example of collateral estoppel: Ted, a real estate developer, starts a multi-project joint venture with several investors under the terms of a single contract. Alice, one of the investors, sues Ted for breach of contract, alleging that he deprived her of her full share of the profits by overstating the costs on one of the projects. The jury finds for Alice on that basis and the court enters judgment for Alice accordingly. Later, another investor, Bob, sues Ted on the same basis—that he too was shorted because Ted overstated costs. Ted contends that his calculations were correct. Under the doctrine of collateral estoppel, Ted would be precluded from relitigating this issue because he already litigated that issue and it was necessary to the final judgment for Alice. Thus, the court would simply decide this issue in Bob’s favor and Bob would prevail if he can prove the other elements of his claim.

Res Judicata

The doctrine of res judicata bars the re-litigation of a claim that has already been litigated. There are four factors that must be satisfied for res judicata to apply:

1. A previous case in which the same claim was raised or could have been raised;
2. The judgment in the prior case involved the same parties or their privies;
3. The previous case was resolved by a final judgment on the merits;
4. The parties had the full and fair opportunity to be heard.

An example of res judicata: Alice sues Ted for breaching the real estate joint venture contract, but in this example Ted prevails. Based on the jury verdict, the court enters judgment for Ted and finds that, in fact, Ted paid Alice what she was owed. Several months later, Alice sues Ted again, this time for fraud, alleging that Ted duped her into the contract by lying about how much money she would make. She argues that even though she may have been paid what she was owed under the contract, the contract itself was procured by fraud and therefore Ted should pay her what he promised. The court should dismiss Alice’s claim because even though it is a different theory and cause of action—fraud rather than breach of contract—that claim could have been raised in the original lawsuit.

When you are facing any type of business dispute, you need an experienced Arizona trial attorney to obtain the best possible result. Contact Mestaz Law at (602) 806-2068 to speak with us about your case.