Rekhi v. Wildwood Industries, Inc.

• Citation: 61 F.3d 1313
• Decision Date: 04 August 1995
• Docket Number: No. 95-1011,95-1011
• Parties: 130 Lab.Cas. P 57,969, 2 Wage & Hour Cas.2d (BNA) 1428 Satinder S. REKHI, Plaintiff-Appellee, v. WILDWOOD INDUSTRIES, INCORPORATED, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 1313

61 F.3d 1313

130 Lab.Cas. P 57,969, 2 Wage & Hour Cas.2d

(BNA) 1428

Satinder S. REKHI, Plaintiff-Appellee, v. WILDWOOD INDUSTRIES, INCORPORATED, Defendant-Appellant.

No. 95-1011.

United States Court of Appeals, Seventh Circuit.

Argued May 17, 1995.

Decided Aug. 4, 1995.

Mark D. Howard, Peoria, IL (argued), for plaintiff-appellee.

J. Reed Roesler, Keck, Mahin & Cate, Peoria, IL (argued), for defendant-appellant.

Before POSNER, Chief Judge, and COFFEY and ROVNER, Circuit Judges.

POSNER, Chief Judge.

The plaintiff, Rekhi, was employed by Wildwood Industries as vice-president of engineering under a five-year written contract, made in August of 1986, which entitled him to certain benefits if he was fired before the contract expired. He was fired two years after the contract was signed, and he filed a claim for $55,770 with the Illinois Department of Labor under the state's Wage Payment and Collection Act, Ill.Rev.Stat. ch. 48, pp 39m-1 et seq., which creates a remedy for employees denied a contractual entitlement to wages or benefits. After a hearing, the Department determined that Wildwood owed Rekhi only $6,407.90. Dissatisfied, Rekhi brought suit in an Illinois state court against Wildwood for breach of contract. The court deemed the order to pay issued by the Department of Labor a judgment in an earlier suit between the same parties arising out of the same dispute, and therefore res judicata; and dismissed the suit. Rekhi appealed, and the Illinois Appellate Court reversed, holding that orders by the Department of Labor in claims under the Wage Payment and Collection Act are not res judicata because the Department's proceedings under the Act are not judicial. 219 Ill.App.3d 312, 162 Ill.Dec. 375, 579 N.E.2d 1189 (1991).

Wildwood did not seek leave to appeal to the Supreme Court of Illinois, so the decision of the Illinois Appellate Court became final and the case returned to the trial court. Rekhi meanwhile had moved to a different state, and because he did not think the state trial judge friendly to his case he dismissed his suit voluntarily (and without prejudice) and refiled it in federal district court as a diversity suit. Wildwood moved the district judge for summary judgment on the ground that the Illinois Appellate Court had been wrong; the order by the Department of Labor was res judicata. The district judge denied the motion, holding that the ruling by the Illinois Appellate Court had established the "law of the case," which he was bound to follow. 816 F.Supp. 1312 (C.D.Ill.1993). The case proceeded to trial, and Rekhi obtained a judgment for $72,000 from which Wildwood appeals, arguing that the district judge should have granted summary judgment on the basis of res judicata.

That Illinois should (as it does, 735 ILCS 5/2-1009) countenance a procedure under which a party dissatisfied with the judge should be able to dismiss and start over after the judge has made a key ruling that has been appealed amazes us, and our amazement is lessened only slightly by the recent statute requiring the refiled suit to be filed within the period of the statute of limitations. 735 ILCS 5/13-217, as amended by the Civil Justice Reform Amendments of 1995, Ill.Pub.Act 89-7. It is not the only questionable feature of the dispute. That Wildwood, rather than seeking review of the Illinois Appellate Court's decision on an issue of state law in the supreme court of the state, should in fact though not in form seek that review in the federal courts, is an affront to federalism, although the primary fault may lie with Rekhi, who decided to start over in federal court. Even so, it is conceivable that Wildwood's oblique challenge to the state court's ruling in federal court could be blocked by an extension of the Rooker-Feldman doctrine, on which see our recent discussion in Hoover v. Wagner, 47 F.3d 845, 848-49 (7th Cir.1995). Neither party mentions the doctrine, however, perhaps because it was Rekhi rather than Wildwood that initiated the switch to the federal court, cf. Homola v. McNamara, 59 F.3d 647, 649-50 (7th Cir.1995), though it is Wildwood that is asking the federal court to "reverse" the state court.

Now, strictly speaking, jurisdictional issues should be resolved ahead of issues on the merits. But when the former are difficult and the latter easy, it is permissible if inelegant and even "illogical" to skip to the latter, provided there is no practical difference in the outcome, and there would be none here. Norton v. Mathews, 427 U.S. 524, 532, 96 S.Ct. 2771, 2775, 49 L.Ed.2d 672 (1976); Tisza v. Communications Workers of America, 953 F.2d 298, 300 (7th Cir.1992); United States v. Parcel of Land, 928 F.2d 1, 4 (1st Cir.1991); Browning-Ferris Industries of South Jersey, Inc. v. Muszynski, 899 F.2d 151, 154-60 (2d Cir.1990). This doctrine, announced almost two decades ago in the Norton case, may be out of keeping with the Supreme Court's current thinking, which is more formalistic. But the Court has not repudiated the doctrine, and it is well established in the courts of appeals, including our own; so we should adhere to it at least until we have a clearer signal of the Court's current view.

One might think that when the case started over in federal district court Rekhi had a slam-dunk argument against Wildwood's defense of res judicata: that the ruling of the Illinois Appellate Court, at least when it became final upon Wildwood's failure to seek leave to appeal to the state supreme court, was itself res judicata as to Wildwood's defense of res judicata. The appellate court determined that orders by the Department of Labor in actions under the Wage Payment and Collection Act are not res judicata; Wildwood could have sought further review of that determination but did not do so; it should be barred from seeking to redetermine it now.

The more precise term for this argument is "collateral estoppel," that being the name of the part of the overall doctrine of res judicata that limits the relitigation of specific issues ("issue preclusion" is the modern term, though it has not succeeded in displacing "collateral estoppel" entirely), as distinct from the relitigation of entire cases or claims ("claim preclusion"). Collateral estoppel applies to rulings of law as well as to findings of fact. That at least is the general rule--with immaterial exceptions, on which see Restatement (Second) of Judgments Sec. 28(2) (1982)--and the rule applied in federal cases, Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 414-15, 66 L.Ed.2d 308 (1980); Martin v. Garman Construction Co., 945 F.2d 1000, 1004 (7th Cir.1991); Dodd v. Hood River County, 59 F.3d 852, 862 (9th Cir.1995); Apparel Art Int'l, Inc. v. Amertex Enterprises Ltd., 48 F.3d 576, 583 n. 9 (1st Cir.1995), although the doctrine is more often applied to factual than to legal issues. But since the effect of a state judgment in federal court depends on the state's rather than the federal law of res judicata and collateral estoppel, 28 U.S.C. Sec. 1738, we must examine the Illinois cases, and here we find a division of authority. Compare People v. Newman, 163 Ill.App.3d 865, 114 Ill.Dec. 512, 516 N.E.2d 667 (1987), and Oberman v. Byrne, 112 Ill.App.3d 155, 67 Ill.Dec. 894, 898, 445 N.E.2d 374, 378 (1983), both holding that collateral estoppel does not apply to issues of law, with Herriford v. Boyles, 193 Ill.App.3d 947, 140 Ill.Dec. 769, 774, 550 N.E.2d 654, 659 (1990), and Morris v. Union Oil Co., 96 Ill.App.3d 148, 51 Ill.Dec. 770, 774, 421 N.E.2d 278, 282 (1981), both holding that it does apply. These two lines of cases exist side by side; neither cites, or indicates any awareness of, the other. If we had to guess, we would guess that the Supreme Court of Illinois would follow the general rule. We so assumed in Wozniak v. DuPage County, 845 F.2d 677, 681-82 (7th Cir.1988); and cf. Freeman United Coal Mining Co. v. Office of Workers' Compensation Program, 20 F.3d 289, 293 (7th Cir.1994).

If so, it might seem to follow that since the ruling by the Illinois Appellate Court in Rekhi's first suit was based on a full and fair adjudication of an issue that had been ruled on with finality in a litigation between the same parties as in the later federal suit, the parties would be bound by that first ruling. But there is a fly in this ointment. The ruling was not actually final, because it remanded the case, and hence was not a final judgment on the merits, which under Illinois law it had to be in order to be res judicata. Relph v. Board of Education, 84 Ill.2d 436, 50 Ill.Dec. 830, 832-33, 420 N.E.2d 147, 149-50 (1981); In re M.B., 235 Ill.App.3d 352, 176 Ill.Dec. 454, 471, 601 N.E.2d 1152, 1169 (1992). These cases are explicit that an order remanding a case for further proceedings of (we assume) a more than ministerial character is not final. Yet they are cases in which the issue was res judicata, not collateral estoppel; and the requirement of finality is not always insisted upon in the latter type of case, Amcast Industrial Corp. v. Detrex Corp., 45 F.3d 155, 158-59 (7th Cir.1995), although we cannot find an Illinois case on the point. If the ruling in the previous case was final in the sense of not tentative and not subject to further examination even though the case was being remanded, why should it not bind the parties? The remand is irrelevant.

We needn't plunge deeper into this thicket. Collateral estoppel is a defense, and not a jurisdictional one, and it is waived by not being argued. Rekhi failed to argue collateral estoppel in the district court. Instead he argued law of the case. That doctrine limits redetermination of rulings made earlier in the same lawsuit. Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 816, 108 S.Ct. 2166, 2177-78, 100 L.Ed.2d 811 (1988); In re PCH Associates, 949 F.2d 585, 592 (2d Cir.1991); Vulcan Materials Co. v. Holzhauer, 234 Ill.App.3d 444, 174 Ill.Dec. 665, 670, 599 N.E.2d 449, 454 (1992). We have two...