View opinion on Lexis Advance[T]he res judicata effect of a federal diversity judgment "is such as would belong to judgments of the State courts rendered under similar circumstances . . ."
Civil Procedure I, Pages 283–287
⭐Semtek Intl. Inc. v. Lockheed Martin Corp.
Supreme Court of the United States, 2001
Facts:
Plaintiff sued defendant in California state court for breach of contracts and various torts. Defendant removed to the District Court for the Central District of California based on diversity. Defendant then successfully moved to dismiss based on California's 2-year statute of limitations. Plaintiff then brought suit over the same causes of action in the State Circuit Court for Baltimore City, Maryland. Under Maryland's 3-year statute of limitations, such a suit was not barred.
Procedural History:
Maryland state court granted defendant's motion to dismiss on the ground of res judicata. The Maryland Court of Special Appeals affirmed, holding that the dismissal by the district court means that the federal res judicata effect should apply.
Issue:
When a federal court dismisses a case, is its claim-preclusive effect that of the state or of the federal courts'?
Plaintiff's Arguments:
Page 284, Paragraph 2
Since a dismissal by a California state court would not be claim preclusive, this case cannot be.
Evaluation:
Plaintiff's basis is not dispositive because it was decided before the Federal Rules of Civil Procedure.
Defendant's Argument:
Federal Rule of Civil Procedure 41(b) says a dismissal operates as an adjudication on the merits, therefore it is entitled to claim preclusive effect.
Evaluations:
Defendant's claim erroneously relies on the assumption that all judgments "on the merits" are entitled to claim-preclusive effect. In addition, binding states to federal courts' judgments based on the federal courts' internal rules would violate the jurisdictional limitation Congress gave the Supreme Court to create the rules.
Defendant's claim would also violate the principle of Erie avoiding substantial variations in outcomes between state and federal litigation.
Reasoning:
Rule 41(a)(1)(B) says that a judgment on the merits in merely a judgment with prejudice. That is, it bars the claim from being brought again in that court, here the United States District Court for the Central District of California. While this is necessary for a claim-preclusive effect in other courts, it does not constitute such on its own.
There is no statutory provision that addresses this issue. The result from Dupasseur that plaintiff advocates is preferable however. As state substantive law applies in such cases, there is no need for a uniform federal rule. Nationwide uniformity is best served by having the same claim-preclusive rule apply regardless of who ordered the dismissal.
Rule/Holding:
A federal court's dismissal has the claim-preclusive effect of as if a state court did so.
Judgment:
Reversed and remanded.
Takeaways:
If there is a federal interest that doesn't rise to the level of a strong interest, try to accommodate it. If both interests can't be accommodated, follow the state law.
This federal reference to state law will not obtain, of course, in situations in which the state law is incompatible with federal interests.
: When state law would apply using the balancing approach in Byrd, the court must also examine whether it can accommodate or reconcile both the state and federal law. If not apply the state law as is.