Richards v. Jefferson County Alabama

• Decision Date: 10 June 1996
• Docket Number: 95386
• Citation: 135 L.Ed.2d 76,517 U.S. 793,116 S.Ct. 1761
• Parties: RICHARDS et al. v. JEFFERSON COUNTY, ALABAMA, et al.
• Court: U.S. Supreme Court

517 U.S. 793

116 S.Ct. 1761

135 L.Ed.2d 76

RICHARDS et al.

v JEFFERSON COUNTY, ALABAMA, et al.

Certiorari to the Supreme Court of Alabama.

No. 95-386.

Supreme Court of the United States

Argued March 26, 1996

Decided June 10, 1996

Syllabus ^*

Petitioners, who are privately employed in Jefferson County, filed a state-court class action claiming that the county's occupation tax violates the Federal and Alabama Constitutions. In granting the county partial summary judgment, the trial court found that petitioners' state claims were barred by a prior adjudication of the tax in an action brought by Birmingham's acting finance director and the city itself, consolidated with a suit by three county taxpayers, see Bedingfield v. Jefferson County, 527 So. 2d 1270, but that petitioners' federal claims had not been decided in that case. The county and respondent intervenor argued on appeal that the federal claims were also barred. The State Supreme Court agreed, concluding that res judicata applied because petitioners were adequately represented in the Bedingfield action.

Held: Because petitioners received neither notice of, nor sufficient representation in, the Bedingfield litigation, that adjudication, as a matter of federal due process, may not bind them and thus cannot bar them from challenging an allegedly unconstitutional deprivation of their property. Pp. 4-13.

(a) The traditional rule that an extreme application of state law res judicata principles may be inconsistent with the Federal Constitution, see Postal Telegraph Cable Co. v. Newport, 247 U. S. 464, 476, reflects the general consensus that one is not bound by a judgment in litigation to which he is not a party. Of course, there is an exception from these principles when there is ``privity'' between a party to the second case and a party who is bound by an earlier judgment. Pp. 4-6.

(b) Because the Bedingfield parties gave petitioners no notice that a suit was pending which would conclusively resolve their legal rights, that proceeding would have a binding effect on them, as absent parties, only if it were so devised and applied as to ensure that those present were of the same class as those absent and that the litigation was so conducted as to ensure the full and fair consideration of the common issue. Hansberry v. Lee, 311 U. S. 32, 43. Because the Bedingfield action plainly does not fit this description, there is no reason to suppose that the court therein took care to protect petitioners' interests in the manner suggested in Hansberry or that the Bedingfield plaintiffs understood their suit to be on behalf of absent taxpayers. Those plaintiffs did not provide representation sufficient to make up for the fact that petitioners neither participated in, nor had the opportunity to participate in, the earlier action. Pp. 6-10.

(c) This court mat assume that if petitioners had relied on their taxpayer status to complain about an alleged misuse of public funds or about other public action having only an indirect impact on their interests, the State would have enjoyed wide latitude in limiting their opportunity to make their case. However, because petitioners present a federal constitutional challenge to the State's attempt to levy personal funds, the Court is not persuaded that the nature of their actions permits it to deviate from the traditional rule that an extreme application of state law res judicata principles violates the Federal Constitution. Pp. 10-12.

662 So. 2d 1127, reversed and remanded.

Stevens, J., delivered the opinion for a unanimous Court.

Justice Stevens delivered the opinion of the Court.

In Hansberry v. Lee, 311 U. S. 32, 37 (1940), we held that it would violate the Due Process Clause of the Fourteenth Amendment to bind litigants to a judgment rendered in an earlier litigation to which they were not parties and in which they were not adequately represented. The decision of the Supreme Court of Alabama that we review today presents us with the same basic question in a somewhat different context.

I.

Jason Richards and Fannie Hill (petitioners) are privately employed in Jefferson County, Alabama. In 1991 they filed a complaint in the Federal District Court challenging the validity of the occupation tax imposed by Jefferson County Ordinance 1120, which had been adopted in 1987. That action was dismissed as barred by the Tax Injunction Act, 28 U. S. C. Section(s) 1341. ¹ They then commenced this action in the Circuit Court of Jefferson County.

Petitioners represent a class of all nonfederal employees subject to the county's tax. ² Petitioners alleged that the tax, which contains a lengthy list of exemptions, violates the Due Process and Equal Protection Clauses of the Fourteenth Amendment and similar provisions of the Alabama Constitution. Because $10 million of the annual proceeds from the county tax have been pledged to the Birmingham-Jefferson Civic Center for a period of 20 years, the court permitted the Center to intervene and support Jefferson County's defense of its tax.

The county moved for summary judgment on the ground that petitioners' claims were barred by a prior adjudication of the tax in an earlier action brought by the acting director of finance for the city of Birmingham and the city itself. That earlier action had been consolidated for trial with a separate suit brought by three county taxpayers, and the Supreme Court of Alabama upheld the tax in the resulting appeal. See Bedingfield v. Jefferson County, 527 So. 2d 1270 (1988). After examining the course of this prior litigation, the trial court granted the county's motion for summary judgment as to the state constitutional claims, but refused to do so as to the federal claims because they had not been decided by either the trial court or the Alabama Supreme Court in Bedingfield.

On appeal, the county argued that the federal claims as well as the state claims were barred by the adjudication in Bedingfield. The Alabama Supreme Court agreed. The majority opinion noted that in Alabama, as in most States, a prior judgment on the merits rendered by a court of competent jurisdiction precludes the relitigation of a claim if there is a "substantial identity of the parties" and if the "same cause of action" is presented in both suits. 662 So. 2d 1127, 1128 (1995). Moreover, the court explained, the prior judgment is generally "`res judicata not only as to all matters litigated and decided by it, but as to all relevant issues which could have been but were not raised and litigated in the suit.'" Ibid. (quoting Heiser v. Woodruff, 327 U. S. 726, 735 (1946)).

The Alabama Supreme Court concluded that even though the opinion in Bedingfield did not mention any federal issue, the judgment in that case met these requirements. The court gave three reasons for this conclusion: (1) the complaints in the earlier case had alleged that the county tax violated the Equal Protection Clause of the Fourteenth Amendment and an equal protection issue had been argued in the appellate briefs, 662 So. 2d, at 1129; (2) the taxpayers in Bedingfield adequately represented petitioners because their respective interests were "essentially identical," 662 So. 2d, at 1130; and (3) in pledging tax revenues and issuing bonds in 1989, the county and the intervenor "could have relied on Bedingfield as authoritatively establishing that the county occupational tax was not unconstitutional for the reasons asserted by the Bedingfield plaintiffs." 662 So. 2d, at 1130.

Justice Maddox dissented. He agreed with the trial judge that no federal constitutional claim had been adjudicated in Bedingfield. 662 So. 2d, at 1130-1131. Moreover, he concluded that the mere fact that the theory advanced by the petitioners in this case could have been asserted in Bedingfield constituted an insufficient reason for barring this action. 662 So. 2d, at 1131-1132.

We now conclude that the State Supreme Court's holding that petitioners are bound by the adjudication in Bedingfield deprived them of the due process of law guaranteed by the Fourteenth Amendment. ³

II.

State courts are generally free to develop their own rules for protecting against the relitigation of common issues or the piecemeal resolution of disputes. Postal Telegraph Cable Co. v. Newport, 247 U. S. 464, 475 (1918). We have long held, however, that extreme applications of the doctrine of res judicata may be inconsistent with a federal right that is "fundamental in character." Id., at 476. ⁴

The limits on a state court's power to develop estoppel rules reflect the general consensus "`in Anglo-American jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.' Hansberry v. Lee, 311 U. S. 32, 40 (1940). . . . This rule is part of our `deep-rooted historic tradition that everyone should have his own day in court.' 18 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure Section(s) 4449, p. 417 (1981)." Martin v. Wilks, 490 U. S. 755, 761-762 (1989). As a consequence, "[a] judgment or decree among parties to a lawsuit resolves issues as among them, but it does not conclude the rights of strangers to those proceedings." Id., at 762; Blonder-Tongue Laboratories, Inc. v. University of Ill. Foundation, 402 U. S. 313, 329 (1971).

Of course, these principles do not always require one to have been a party to a judgment in order to be bound by it. Most notably, there is an exception when it can be said that there is "privity" between a party to the second case and a party who is bound by an earlier judgment. For example, a judgment that is binding on a guardian or trustee may also bind the ward or the beneficiaries of a trust. Moreover, although there are clearly constitutional limits on the "privity" exception, the term "privity" is now used to describe various relationships between litigants that would not have come within the...