Collateral Estoppel and Unemployment Compensation Hearings

In the law, we have this concept called "collateral estoppel." The gist of it is that after a party litigates and loses on an issue once, the party may not litigate that issue again (sometimes called "issue preclusion"). It sounds simple, but it can get surprisingly complicated.

In Mathis v. Christian Heating and Air Conditioning, Inc. (E.D. Pa.), an employee raised some employment discrimination claims. The employer filed a motion to dismiss, arguing:

Defendant argued that plaintiff was barred under the doctrine of collateral estoppel from relitigating a range of issues that were decided against plaintiff in his state unemployment compensation proceedings that are central to his employment discrimination claims. In particular, defendant contended that plaintiff could not re-litigate whether he chose to leave his employment with defendant or was involuntarily terminated or whether he had a sincerely held religious belief that defendant had burdened, among other issues.

Well, did it work? No. It turns out that Pennsylvania's Unemployment Compensation law specifically addresses this issue:

[T]he law provides that “[n]o finding of fact or law, judgment, conclusion, or final order made with respect to a claim for unemployment compensation under [the Pennsylvania Unemployment Compensation Law] may be deemed to be conclusive or binding in any separate or subsequent action or proceeding in another forum.” 43 P.S. § 829 . . . . In short, under Pennsylvania law findings of fact and conclusions of law made with respect to claims for unemployment compensation do not have preclusive effect in subsequent actions, such as the one presently before this Court.

I learn something new every day.

Res Judicata No Bar to Events Postdating Initial Complaint - COTW #55

The Case of the Week was going to be the lifeguard alleging age discrimination because of a speedo requirement - but as the link shows, Jon Hyman already has that one covered. Also, the Third Circuit recently ruled on an important timing issue in a matter of first impression. So, the Case of the Week is now Morgan v. Covington Tp., 2011 WL 3276012 (Aug. 2, 2011).

As the case presents a timing issue, it would help to start with a timeline:

- Sometime prior to November 5, 2007, a public employee files a First Amendment retaliation complaint in federal court based on disciplinary action (including an administrative hearing scheduled for November 5, 2007). We'll call this "Morgan I."
- The employer goes ahead with the hearing and on January 15, 2008, the employer decides to terminate the employee.
- The employee waits until April 9, 2009 to file a motion to amend his complaint to include the termination.
- The Court denies his motion to amend because trial is just 11 days away, on April 20, 2009.
- The Plaintiff files another Complaint ("Morgan II") prior to trial in Morgan I.
- The Defendants all win at jury trial in Morgan I.
- The Defendants move to dismiss Morgan II because the issues have already been litigated in Morgan I and the Plaintiff should be barred from getting another shot (This is called Res Judicata for you non-law folks).
- The trial court agrees and tosses Morgan II.

Did you get all of that? That brings us to the Third Circuit opinion. As a matter of first impression, the Court adopted the bright line rule that "res judicata does not bar claims that are predicated on events that postdate the filing of the initial complaint." In other words, because the termination occurred after he filed the complaint in Morgan I, Morgan II is back on.

This is a "bright line" rule that is easy to adopt... if the events from the second complaint occurred after the filing of the first complaint, then res judicata does not bar them. This clarity and ease of application benefits litigants. It's a tough pill to swallow in cases like Morgan though. This guy waited fifteen months to try to amend his complaint eleven days before trial... and now, the Courts and both parties are stuck wasting their time and resources relitigating the same issues that a jury already decided. But, as the Third Circuit noted, "certainty and predictability are important."

Sidenote: For my non-Third Circuit readers, the Court noted that five other circuits have adopted this bright line rule: the Second, Sixth, Seventh, Tenth, and Eleventh.

Posted by Philip Miles, an attorney with McQuaide Blasko in State College, Pennsylvania in the firm's civil litigation and labor and employment law practice groups.