Deguelle v. Camilli, 12–2541.

• Decision Date: 01 August 2013
• Docket Number: No. 12–2541.,12–2541.
• Parties: Michael J. DeGUELLE, Plaintiff–Appellant, v. Kristen J. CAMILLI, et al., Defendants–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

724 F.3d 933

Michael J. DeGUELLE, Plaintiff–Appellant,

v.Kristen J. CAMILLI, et al., Defendants–Appellees.

No. 12–2541.

United States Court of Appeals,Seventh Circuit.

Argued July 9, 2013.

Decided Aug. 1, 2013.

Michael J. DeGuelle, Racine, WI, pro se.

Susan R. Maisa, Attorney, Thomas L. Shriner, Jr., Attorney, Foley & Lardner LLP, Milwaukee, WI, for Defendants–Appellees.

Before EASTERBROOK, Chief Judge, and POSNER and WILLIAMS, Circuit Judges.

POSNER, Circuit Judge.

The plaintiff, DeGuelle, an accountant, was employed between 1997 and 2009 in the tax department of S.C. Johnson & Son, Inc., a large Wisconsin manufacturer of cleaning supplies. He alleges that while employed there he discovered that the company had committed tax fraud. The company fired him, then sued him in a Wisconsin state court for breach of contract, conversion, and defamation, all arising from his having taken confidential corporate tax documents with him when he was fired and having publicly accused the company, in the media (a newspaper), of tax fraud. He counterclaimed for wrongful termination and breach of contract, claiming the company had fired him in retaliation for his opposing the alleged tax fraud. The company moved for summary judgment, attaching an affidavit from a tax lawyer at Kirkland & Ellis denying there had been any tax fraud. DeGuelle, litigating pro se, filed no counteraffidavits, and so the judge granted summary judgment in favor of S.C. Johnson & Son both on the company's claims and DeGuelle's counterclaims. The Wisconsin court of appeals affirmed a month before the present appeal was argued. S.C. Johnson & Son, Inc. v. DeGuelle, No. 2011AP2427, 2013 WL 2420925 (Wis.App. June 5, 2013) (per curiam).

DeGuelle had filed the present suit in federal district court against S.C. Johnson & Son long before the Wisconsin suit was dismissed. The district court had dismissed the suit for failure to state a claim, but we had reversed, 664 F.3d 192 (7th Cir.2011), and remanded the case to the district court. The federal suit charges both federal and state violations, but all growing out of the alleged tax fraud. If there was no fraud, the present suit is groundless, as noted in our previous opinion. Id. at 200. On remand the district judge, after the trial court in Wisconsin granted summary judgment in favor of the company, did likewise. His ground was that the finding by the Wisconsin court that there had been no tax fraud bound him by the doctrine of collateral estoppel (a term giving way to “issue preclusion”). If his application of the doctrine was sound, he was right to dismiss because, as we said, if there was no tax fraud there is no merit to this suit. He was right even though he dismissed the suit before the state appellate court decided DeGuelle's appeal. The pendency of an appeal doesn't suspend the preclusive effect of the judgment being appealed. Virnich v. Vorwald, 664 F.3d 206, 216 and n. 4 (7th Cir.2011) (Wisconsin law).

As collateral estoppel has traditionally been understood, the resolution of an issue in a previous litigation between the same parties (or parties “in privity” with them, but that is not involved in this case) normally is conclusive of the issue in a subsequent litigation. But there are conditions. The party against whom the issue had been resolved must have had, first, a “full and fair opportunity” to litigate the issue in the previous suit (where “opportunity” includes incentive—the parties could foresee that the same issue might arise in a future litigation in which the winner would assert collateral estoppel), and, second, a meaningful opportunity to appeal the resolution of the issue. A party would not have had such an opportunity if for example the resolution had been inessential to the decision of the trial court, and therefore either ignored by the parties or treated by the appellate court as moot. See, e.g., Taylor v. Sturgell, 553 U.S. 880, 892, 128 S.Ct. 2161, 171 L.Ed.2d 155 (2008); United States v. Kashamu, 656 F.3d 679, 685–86 (7th Cir.2011); In re Catt, 368 F.3d 789, 791–92 (7th Cir.2004); Bell v. Dillard Dep't Stores, Inc., 85 F.3d 1451, 1456 (10th Cir.1996). But when the conditions for applying collateral estoppel are satisfied, “the doctrine promotes important goals: it allows a party only one opportunity to litigate an issue thereby conserving the time and resources of the parties and the court; promotes the finality of judgments; preserves the integrity of the judicial system by eliminating inconsistent results; and ensures that a party not be able to relitigate issues already decided against it in prior litigation.” Johnson v. Watkins, 101 F.3d 792, 795 (2d Cir.1996).

There is no question of lack of opportunity or incentive to appeal—DeGuelle got a ruling from the Wisconsin appellate court on the trial court's determination regarding tax fraud. But he argues that he was denied a full and fair hearing in the trial court (that is, an adequate hearing—“full and fair” is a redundant expression) by being denied an opportunity to conduct discovery without which the tax expert he had hired to counter the Kirkland & Ellis tax expert could not prepare a proper affidavit. The argument is groundless. He'd been allowed to conduct discovery and had done so. But because he had failed to respect confidentiality orders, the judge directed that confidential financial records of S.C. Johnson & Son be sent directly to DeGuelle's expert—and this was done—with the proviso that while the expert could discuss the preparation of his expert opinion, and therefore the pertinent documents, with DeGuelle, he couldn't show him the documents without the judge's permission. DeGuelle responded by ordering his expert not to prepare an expert report. That unreasonable behavior could not have justified the judge in rejecting the Kirkland lawyer's expert opinion—as demanded by DeGuelle on the false ground that the judge had precluded his filing an opinion by his tax expert. In all likelihood his expert after reviewing the documents concluded that there was no evidence of tax fraud. But this inference is not necessary to justify the judge's actions.

Were the doctrine of collateral estoppel as compact as we have thus far assumed, requiring only that the finding sought to be given collateral estoppel effect in subsequent litigation between the same parties (or their privies) have been rendered after an opportunity given for (and an incentive to demand) an adequate hearing and for challenging the finding in an appeal, we could stop here and affirm. For the Wisconsin appellate court has now determined that the Kirkland lawyer's affidavit, plus other evidence, “establish[es] that [S.C. Johnson & Son] did not engage in any tax fraud or crimes as DeGuelle publicly stated. The burden to prove criminal fraud was on DeGuelle, and he submitted no counteraffidavits. As stated by the trial court, DeGuelle's claims were unsubstantiated.” S.C. Johnson & Son, Inc. v. DeGuelle, supra, 2013 WL 2420925 at ¶ 25. (The reference to “publicly stated” is to the Johnson company's defamation claim.) That determination by the appellate court is itself entitled to collateral estoppel effect; and once that effect is given to the appellate court's determination that the trial court had properly rejected DeGuelle's claim, any shadow over the procedures employed by that court is lifted.

But we can't stop here. We are required to apply not our own notions of collateral estoppel, or the federal common law of collateral estoppel (illustrated by the federal cases we cited earlier—for “the preclusive effect of a federal-court judgment is determined by federal common law,” Taylor v. Sturgell, supra, 553 U.S. at 891, 128 S.Ct. 2161), but Wisconsin's doctrine of collateral estoppel. True, the full faith and credit clause (U.S. Const. Art. IV, § 1) requires only states to recognize and enforce the judgments of the courts of other states, Franchise Tax Board v. Hyatt, 538 U.S. 488, 494, 123 S.Ct. 1683, 155 L.Ed.2d 702 (2003); Rosin v. Monken, 599 F.3d 574, 576–77 (7th Cir.2010), and thus give those judgments the same preclusive force they would enjoy in the originating state. Baker v. General Motors Corp., 522 U.S. 222, 233–34, 118 S.Ct. 657, 139 L.Ed.2d 580 (1998). But the statute that implements the full faith and credit clause, 28 U.S.C. § 1738, goes further than the constitutional clause and requires federal as well as state courts to give state court judgments the same preclusive effect that the state courts that issued the judgments would give them. E.g., Allen v. McCurry, 449 U.S. 90, 95–96, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980); Burke v. Johnston, 452 F.3d 665, 669 (7th Cir.2006); FPL Energy Maine Hydro LLC v. FERC, 551 F.3d 58, 63 n. 2 (1st Cir.2008). And Wisconsin, like most states if one may judge from the Restatement (Second) of Judgments § 27 (1982), is not content with a simple, straightforward test of collateral estoppel, the kind of test, sketched above, that we would find attractive as an original matter.

Instead Wisconsin's supreme court has adopted a five-factor “test” for deciding whether to give a finding collateral estoppel effect. In re Estate of Rille ex rel. Rille, 300 Wis.2d 1, 728 N.W.2d 693, 707 (2007). No weight is assigned to any factor; the weighting is in the discretion of the trial court. Id. at 707. (Such a multifactor test is thus more accurately termed a multifactor list. United States v. Rosales, 716 F.3d 996, 997 (7th Cir.2013).)

The factors...