PARKLANE HOSIERY CO., INC. V. SHORE, 439 U. S. 322 (1979)

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U.S. Supreme Court

Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322 (1979)

Parklane Hosiery Co., Inc. v. Shore

No. 77-1305

Argued October 30, 1978

Decided January 9, 1979

439 U.S. 322


Respondent brought this stockholder's class action in the District Court for damages and other relief against petitioners, a corporation, its officers, directors, and stockholders, who allegedly had issued a materially false and misleading proxy statement in violation of the federal securities laws and Securities and Exchange Commission (SEC) regulations. Before the action came to trial, the SEC sued the same defendants in the District Court alleging that the proxy statement was materially false and misleading in essentially the same respects as respondent had claimed. The District Court, after a nonjury trial, entered a declaratory judgment for the SEC, and the Court of Appeals affirmed. Respondent in this case then moved for partial summary judgment against petitioners, asserting that they were collaterally estopped from relitigating the issues that had been resolved against them in the SEC suit. The District Court denied the motion on the ground that such an application of collateral estoppel would deny petitioners their Seventh Amendment right to a jury trial. The Court of Appeals reversed.


1. Petitioners, who had a "full and fair" opportunity to litigate their claims in the SEC action, are collaterally estopped from relitigating the question of whether the proxy statement was materially false and misleading. Pp. 439 U. S. 326-333.

(a) The mutuality doctrine, under which neither party could use a prior judgment against the other unless both parties were bound by the same judgment, no longer applies. See Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U. S. 313. Pp. 402 U. S. 326-328.

(b) The offensive use of collateral estoppel (when, as here, the plaintiff seeks to foreclose the defendant from litigating an issue that the defendant has previously litigated unsuccessfully in an action with another party) does not promote judicial economy in the same manner that is promoted by defensive use (when a defendant seeks to prevent a plaintiff from asserting a claim that the plaintiff has previously litigated and lost against another defendant), and such offensive use may also be unfair to a defendant in various ways. Therefore, the general rule should be that, in cases where a plaintiff could easily have joined in the chanrobles.com-red

Page 439 U. S. 323

earlier action, or where the application of offensive estoppel would be unfair to a defendant, a trial judge, in the exercise of his discretion, should not allow the use of offensive collateral estoppel. Pp. 439 U. S. 329-331.

(c) In this case, however, the application of offensive collateral estoppel will not reward a private plaintiff who could have joined in the previous action, since the respondent probably could not have joined in the injunctive action brought by the SEC. Nor is there any unfairness to petitioners in such application here, since petitioners had every incentive fully and vigorously to litigate the SEC suit; the judgment in the SEC action was not inconsistent with any prior decision; and in the respondent's action there will be no procedural opportunities available to the petitioners that were unavailable in the SEC action of a kind that might be likely to cause a different result. Pp. 439 U. S. 331-333.

2. The use of collateral estoppel in this case would not violate petitioners' Seventh Amendment right to a jury trial. Pp. 439 U. S. 333-337.

(a) An equitable determination can have collateral estoppel effect in a subsequent legal action without violating the Seventh Amendment. Katchen v. Landy, 382 U. S. 323. Pp. 439 U. S. 333-335.

(b) Petitioners' contention that, since the scope of the Seventh Amendment must be determined by reference to the common law as it existed in 1791, at which time collateral estoppel was permitted only where there was mutuality of parties, is without merit, for many procedural devices developed since 1791 that have diminished the civil jury's historic domain have been found not to violate the Seventh Amendment. See, e.g., Galloway v. United States, 319 U. S. 372, 319 U. S. 388-393. Pp. 439 U. S. 335-337.

565 F.2d 815, affirmed.

STEWART, J., delivered the opinion of the Court, in which BURGER, C.J.,and BRENNAN, WHITE, MARSHALL, BLACKMUN, POWELL, and STEVENS, JJ., joined. REHNQUIST, J., filed a dissenting opinion, post, p. 439 U. S. 337. chanrobles.com-red

Page 439 U. S. 324


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