Spiker v. CAPITOL MILK PRODUCERS CO-OP., INC., Civ. A. No. 82-0128-H

• Decision Date: 29 November 1983
• Docket Number: 82-0142-H and 82-0143-H.,Civ. A. No. 82-0128-H,82-0129-H
• Citation: 577 F. Supp. 416
• Parties: Patty Neal SPIKER, etc., Plaintiff, v. CAPITOL MILK PRODUCERS COOPERATIVE, INC., et al., Defendants and Third-Party Plaintiffs, v. Willie Lee LOYD, Third-Party Defendant.
• Court: U.S. District Court — Western District of Virginia

577 F. Supp. 416

Patty Neal SPIKER, etc., Plaintiff, v. CAPITOL MILK PRODUCERS COOPERATIVE, INC., et al., Defendants and Third-Party Plaintiffs, v. Willie Lee LOYD, Third-Party Defendant.

Civ. A. Nos. 82-0128-H, 82-0129-H, 82-0142-H and 82-0143-H.

United States District Court, W.D. Virginia, Harrisonburg Division.

November 29, 1983.

Thomas V. Monahan, Leesburg, Va., for plaintiff.

Brian J. Donato, Charlottesville, Va., for defendants.

MEMORANDUM OPINION

MICHAEL, District Judge.

This diversity action arises out of the collision on August 16, 1980, between a car operated by Willie Lee Loyd and a Capitol Milk truck operated by Melvin Smith. The Capitol Milk truck had pulled off onto the emergency lane of Interstate 81 in Shenandoah County, Virginia, when the car left the main lanes of the highway and struck the parked truck. Four of the seven occupants in the car were killed as a result of the accident. The plaintiff filed the complaints in these four consolidated actions on August 6, 1982, on behalf of the estates of two of the passengers killed in the accident.

Previously, the estate of another passenger killed in the accident brought suit in this court against Capitol Milk, Melvin Smith, and Willie Lee Loyd. A trial on the merits ensued, with a jury verdict returned in favor of the defendants Capitol Milk and Melvin Smith. The court had already entered a default judgment against Willie Lee Loyd.

The defendants and third-party plaintiffs in the present suit, Capitol Milk and Melvin Smith, now seek to dismiss this action on grounds of collateral estoppel, based on the favorable jury verdict in the earlier action in this court brought by the estate of the other passenger. This motion to dismiss has been fully briefed and argued and is now ripe for disposition.

As the defendants point out, diversity of citizenship provides the jurisdictional basis for both the present and the earlier suits; moreover, the substantive allegations in the present and former suits are the same. The question thus becomes whether principles of res judicata preclude this plaintiff not a party to the first suit from relitigating the liability of the defendants.

I.

The first issue to be decided is whether federal or state concepts of res judicata govern in this diversity suit. In the context of what preclusive effect should be given a previous state court judgment by a federal court sitting in diversity, authority supports applying the substantive law of the state in which the federal court sits. See Graves v. Associated Transport, Inc., 344 F.2d 894, 896 (4th Cir.1965) (applying Virginia law on mutuality rule of collateral estoppel); Alderman v. Chrysler Corp., 480 F.Supp. 600, 603 (E.D. Va.1979) (applying Virginia law on privity rule of collateral estoppel). Where, however, the first judgment is one rendered in a federal forum, different considerations apply. One of the strongest policies a court can have is determining the scope of its own judgments. See J. Aron & Co. v. Service Transportation Co., 515 F.Supp. 428, 440 (D.Md.1981), quoting Kern v. Hettinger, 303 F.2d 333, 340 (2d Cir.1962). The Restatement (Second) of Judgments § 87 (1980) provides that "federal law determines the effects under the rules of res judicata of a judgment of a federal court." While federal law may govern, the federal court may well choose to adopt state res judicata rules where the principles in question concern substantive rather than procedural policies. In the latter, a federal rule should probably be followed. As to the former, however, Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) and its progeny, particularly Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958), suggest that state law should govern. See 18 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 4472 (1981). For example, the concept of "privity" in res judicata doctrine reflects a distinctly substantive policy, because privity arises from "considerations going to stability of legal relationships — not unlike definitions of property." Restatement (Second) of Judgments § 87 comment b (1980). Consequently, this court shall apply federal law when considering the effects of a previous judgment in this court; nevertheless, state law will be adopted where substance rather than procedure is at stake.

II.

The defendants are not asserting that offensive or defensive use of collateral estoppel is involved in this case. In offensive use of collateral estoppel, preclusion is used as a "sword" by a nonparty against a defendant who was a party to the first suit. In defensive use of collateral estoppel, on the other hand, preclusion is used as a "shield" by a defendant not a party to the first suit against a plaintiff who was a party to the first suit. In neither case, however, is a nonparty bound by the judgment in the first suit. The defendants here, though, wish to invoke collateral estoppel against one not a party to the action on which estoppel is based. Such an argument flies in the face of the basic principle of collateral estoppel that parties to a prior action may be bound but nonparties are not bound. This fundamental premise arises out of our deep-rooted historic tradition that everyone should have his own day in court. See Alderman v. Chrysler Corp., 480 F.Supp. 600, 607 (E.D.Va.1979). As one commentator observes,

Binding a nonparty on the basis of a judgment in an action in which he did not participate, and of which he may not even have been aware, also conflicts with important values basic to our judicial system: the right of a litigant to present his arguments to a tribunal before having his rights adjudicated, and the importance of such personal participation to the fairness of the decision-making process.

Note, Collateral Estoppel of Nonparties, 87 Harv.L.Rev. 1485, 1496-97 (1974). Certainly, this interest in not binding a nonparty is important; extremely powerful countervailing interests would have to be put forward by the defendants to justify its being overridden.

One exception to this general rule of not binding a nonparty is where the nonparty to the first suit was in "privity" with a party to the first suit. Such a relationship may extend to those persons who were not formal parties to the first litigation but who actively participated in it. A successor in interest to property, a principal and surety, or master and servant are other familiar examples of the privity concept where a nonparty may be bound by a previous judgment. See generally 18 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 4448 (1981).

As noted above, this court will look to the law of Virginia in examining the reach of the privity notion. The Supreme Court of Virginia has defined privity in the context of collateral estoppel as follows:

It is generally held that "privity" means a mutual

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