Civil Procedure II, Pages 741โ€“743

Gargallo v. Merrill Lynch, Pierce, Fenner & Smith

United States Court of Appeals for the Sixth Circuit, 1990

Facts:

Plaintiff opened a margin account with defendant, lost money, and ended up $17,000 in debt. Defendant sued in state court to recover the debt, and plaintiff counter-claimed that defendant violated federal security laws. The state court dismissed plaintiff's claim with prejudice for not complying with defendant's discovery requests. Plaintiff then filed his claim in federal court.

Procedural History:

The district court dismissed the suit on res judicata grounds.

Issue:

Do state court dismissals with prejudice of claims that they do not have subject matter jurisdiction over preclude the claims in federal court?

Rules:

  • Under full faith and credit, the federal courts must give state court judgments the same preclusive effect they would have in a state court.

  • LexisNexis IconWestLaw LogoGoogle Scholar LogoJustia LogoPage 663 (not in casebook)

    [A] state court judgment rendered in a matter over which the court had no subject matter jurisdiction is generally given no claim preclusive effect, see Restatement (Second) of Judgments ยง 26(1)(c).

Holding:

No, state court judgments upon causes of action over which the court had no jurisdiction do not have claim preclusive effects. Reversed and remanded.

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