Burlington v. Hyundai

Opinions of the United

1995 Decisions States Court of Appeals

for the Third Circuit

8-18-1995

Burlington v Hyundai

Precedential or Non-Precedential:

Docket 94-5550

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995

Recommended Citation

"Burlington v Hyundai" (1995). 1995 Decisions. Paper 227.

http://digitalcommons.law.villanova.edu/thirdcircuit_1995/227

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 1995 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________________

NO. 94-5550

____________________

BURLINGTON NORTHERN RAILROAD COMPANY

Appellee

v.

HYUNDAI MERCHANT MARINE CO., LTD.

Appellant

_______________________________

On Appeal From the United States District Court

For the District of New Jersey

(D.C. Civ. No. 93-cv-01478)

_______________________________

Argued: March 7, 1995

Before: BECKER, SCIRICA, and WOOD, Circuit Judges.0

(Filed August 18, 1995)

BRUCE G. PAULSEN, ESQUIRE (ARGUED)

S. NINA GELLERT, ESQUIRE

Nourse & Bowles

One Exchange Plaza

55 Broadway

New York, New York 10006

Attorneys for Appellant

BARRY N. GUTTERMAN, ESQUIRE (ARGUED)

WILLIAM D. BIERMAN, ESQUIRE

Barry N. Gutterman & Associates

52 Vanderbilt Avenue

New York, New York 10017

0

Honorable Harlington S. Wood, Jr., United States Circuit Judge

for the Seventh Circuit, sitting by designation.

1

Attorneys for Appellee

_________________________

OPINION OF THE COURT

_________________________

BECKER, Circuit Judge.

This appeal concerns the timeliness of a maritime

indemnity claim under the Carmack Amendment to the Interstate

Commerce Act, 49 U.S.C. § 11707, though its ultimate disposition

turns on the application of an "unmixed questions of law"

exception to the doctrine of issue preclusion. The case arises

from a shipment of furnace equipment by Tongil Co., Ltd. from

Milwaukee, Wisconsin to Pusan, South Korea that arrived in

damaged condition. The goods were carried by rail from Milwaukee

to Seattle by plaintiff Burlington Northern Railroad Company

("Burlington"), and thence by sea to Pusan by defendant Hyundai

Merchant Marine Co. ("Hyundai"). The damage apparently occurred

while the cargo was in the possession of Burlington, but Tongil

sued Hyundai for the damage. The case settled and approximately

one month following the settlement, Hyundai sought indemnity from

Burlington, which refused to pay because notice of the claim was

not given within nine months following the delivery of the

shipment as required in a Burlington circular, adopted as part of

the contract of carriage.

Burlington brought a declaratory judgment action in

district court. The court granted summary judgment for

Burlington, and Hyundai brought this appeal. Although the legal

question implicated by the timeliness issue is an interesting and

2

important one, this appeal turns not on that issue but on the

doctrine of issue preclusion, for Hyundai’s principal argument on

appeal is that, in holding the notice of the claim untimely, the

district court erred by failing to give issue preclusive effect

to a decision by the District Court for the Western District of

Washington in Atlantic Mutual v. OOCL, 1992 U.S. Dist LEXIS 13284

(W.D. Wash 1992). That case involved an indemnity claim brought

against Burlington by a different ocean carrier for damage

sustained to a shipment of Samsonite luggage from Taiwan to

Denver via Seattle. The Atlantic Mutual court concluded that a

time limit contained in a Burlington circular (adopted as part of

the contract of carriage) did not foreclose the action in

indemnity since such claims do not accrue and time limitations

therefore cannot commence until liability is determined or a

cognizable loss is incurred. If this general rule for indemnity

claims were applied in the present action, Hyundai’s claim would

have been timely presented.

The district court in this case rejected Hyundai’s

argument and refused to apply the doctrine of issue preclusion to

the issue resolved in Atlantic Mutual, relying on an exception

for "unmixed questions of law," the scope of which is a question

of first impression in this circuit. While the continued

viability of this exception has been called into question by the

Supreme Court’s decision in United States v. Stauffer Chemical

Co., 464 U.S. 165, 104 S. Ct. 575 (1984), we conclude that such

an exception for questions of law continues to apply, and that it

is satisfied only so long as the issue involved is one of law and

3

either (1) the two actions involve claims that are substantially

unrelated or (2) a new determination of the legal issue is

warranted in order to take account of an intervening change in

the applicable legal context or otherwise to avoid inequitable

administration of the laws. See RESTATEMENT (SECOND) OF JUDGMENTS § 28

(1982).

Because the Atlantic Mutual action and this case are

not substantially unrelated and since a new determination of the

legal issue involved is not warranted, we conclude that the

district court erred by relying on this exception to the

otherwise applicable doctrine of issue preclusion. Accordingly,

we will reverse the order of the district court granting summary

judgment to Burlington, and direct the district court on remand

to grant issue preclusive effect to the decision of the district

court in Atlantic Mutual.0

I. FACTS AND PROCEDURAL HISTORY

A. The Tongil Action

Hyundai’s indemnity claim originates in an action

brought by Tongil in the District Court for the Central District

0

Given our conclusion that the district court erred in failing

to give preclusive effect to the Atlantic Mutual decision, we

need not address the correctness of the district court’s

resolution of the merits, i.e. its holding that the provision in

the Burlington circular (adopted as part of the contract of

carriage), providing an absolute time limit for the filing of

claims, is not subject to the general common law rule of accrual

in indemnity actions, which provides that a cause of action in

indemnity does not accrue -- and thus that a statute of

limitations does not begin to run -- until such time that

liability is determined or a cognizable loss is suffered.

4

of California for damages sustained to a cargo of furnace

equipment shipped aboard M/V Hyundai Innovator in 1986 from

Seattle, Washington to Pusan, South Korea. See Tongil Co. v.

Vessel Hyundai Innovator, Case No. 88-04895 (C.D. Ca. 1988). The

cargo had originally been shipped from Milwaukee to Seattle via

Burlington railcar. On August 10, 1988, Tongil filed suit

against Hyundai for the damages sustained to the shipment. On

December 15, 1988, in response, Hyundai gave Burlington notice of

its indemnity claim, but Burlington denied Hyundai’s claim as not

having been filed within the nine month time limitation

prescribed in its circular and adopted as part of the contract of

carriage. In particular, Burlington relied on Item 12 of its

Rules Memorandum 2-C, which provides:

As a condition precedent to recovery, any

claim for loss or damage to lading shall be

filed with BN [Burlington Northern] within

nine (9) months of the date of delivery of

the shipment, or within nine (9) months of a

reasonable time for delivery in the event of

non-delivery. Claim shall be supported with

a copy of the shipping order, invoice,

inspection report, or other proof of loss,

and, if possible, the paid freight bill.

App. at 107.

In the underlying action by Tongil against Hyundai, to

which Burlington was not a party, the District Court for the

Central District of California concluded, following a bench

trial, that the cargo was in fact damaged while in the possession

of Burlington; yet the court awarded Tongil $114,870.64 in

damages, interests, and costs against Hyundai. Hyundai appealed

the judgment to the Ninth Circuit Court of Appeals, which

5

reversed. See Tongil Co. v. Vessel Hyundai Innovator, 968 F.2d

999 (9th Cir. 1992). Following the appeal, Hyundai settled the

action with Tongil for $10,000 and then on January 26, 1993,

requested indemnity of this amount together with legal expenses

and costs totaling $104,079.49, which Burlington again denied.

B. The Atlantic Mutual Action

While Burlington was relying on Item 2-C of its Rules

Memorandum to deny Hyundai’s indemnity claim, it was defending

another indemnity action in the District Court for the Western

District of Washington brought by Orient Overseas Container Line

("OOCL"). See Atlantic Mutual v. OOCL, 1992 U.S. Dist LEXIS

13284 (W.D. Wash. 1992). Like Hyundai’s claim, the viability of

OOCL’s claim in the Atlantic Mutual action turned on the question

whether the general rule for indemnity accrual -- that an

indemnity claim "does not accrue until the indemnitee’s liability

is determined by judgment or payment," id. at *9-10, and,

therefore, that a statute of limitations on an indemnity claim

cannot begin to run until such time -- should apply despite Item

2-C of Burlington’s Rules Memorandum, which provided that the

time limitation should be measured from the date of delivery.

Atlantic Mutual had filed suit against OOCL to recover payments

that Atlantic Mutual had made as an insurer to Samsonite Pacific,

Ltd. ("Samsonite") for damages to a shipment of luggage en route

from Taiwan to Denver via Seattle. In response, OOCL had filed a

third party claim against Burlington for indemnity for its

liability to Atlantic Mutual.

6

Burlington’s denial of OOCL’s indemnity claim was based

solely on its contention that the claim was time barred since

OOCL had failed to bring suit within the time period specified in

Burlington Rules Memorandum 2-C. This provision provided that

"all suits against BN [Burlington Northern] shall be commenced no

later than 1 year after the date of delivery." Id. at *5. OOCL,

which notified Burlington of its claim more than one year after

delivery, contended that this contractual limitations period did

not alter the general rule governing actions in indemnity. The

Washington district court agreed with OOCL and concluded that its

"cross-claim for indemnification is not barred by the limitations

period in Burlington Northern’s Rules Memorandum 2-C." Id. at

*12. In reaching this conclusion, the court relied on the

opinion of the Ninth Circuit in States S.S. Co. v. American

Smelting & Refining Co., 339 F.2d 66, 70 (9th Cir. 1964), cert.

denied 380 U.S. 964 (1965), which it read as concluding that an

"indemnity claim . . . does not accrue until the indemnitee has

made actual payment." Atlantic Mutual at *12; see also id.

("[A]n action for indemnification accrues at the time of the

indemnitee’s payment despite a shorter contractual time

limitations period applying to claims between the parties.").

C. The Hyundai Action

Following the decision in Atlantic Mutual, Burlington,

having already denied Hyundai’s claim for indemnity in connection

with the shipment of furnace equipment on several occasions,

instituted this action on April 1, 1993, in the District Court

for the District of New Jersey, seeking a declaratory judgment

7

that Hyundai had no timely claim against Burlington. In

response, Hyundai filed a counterclaim seeking the $104,079.49

from Burlington in indemnity, and moved to transfer both actions

to either the Central District of California or the Western

District of Washington pursuant to 28 U.S.C. § 1404(a), given

that none of the facts in the present case or the underlying

action occurred in New Jersey and that neither of the parties is

incorporated or has a principal place of business in New Jersey.

Burlington responded by moving for summary judgment on

its declaratory judgment action. Hyundai opposed this motion on

the grounds that (1) Burlington was estopped from relitigating

the issues decided in Atlantic Mutual and (2) that, on the

merits, Hyundai’s indemnity claim was timely presented. The

district court rejected both of these arguments, granted

Burlington’s request for summary judgment in the declaratory

judgment action, dismissed Hyundai’s counterclaim, and denied as

moot Hyundai’s motion to transfer the case. In rejecting

Hyundai’s estoppel argument, the district court held: "The Court

interprets the Atlantic Mutual decision as involving a pure

question of law, decided under the law of another Circuit, and

therefore will not accord it issue-preclusive effect." Dist Op.

at 8. This appeal followed.

Since the district court’s decision to grant summary

judgment rested on a legal determination of when issue preclusion

should apply to "unmixed questions of law," our review is

plenary. In reviewing the district court’s decision, we apply

federal common law principles of issue preclusion since we are

8

examining the issue preclusive effect of a prior federal court

action. See NLRB v. Yellow Freight Sys., Inc., 930 F.2d 316, 320

(3d Cir. 1991); Hicks v. Quaker Oats Co., 662 F.2d 1158, 1166

(5th Cir. 1981).

II. ISSUE PRECLUSION

A. Introduction

The doctrine of issue preclusion,0 which is at issue in

this action, derives from the simple principle that "later courts

should honor the first actual decision of a matter that has been

actually litigated." 18 CHARLES A. WRIGHT ET. AL., FEDERAL PRACTICE AND

PROCEDURE § 4416 (1981) [hereinafter WRIGHT & MILLER].0 This

0

The doctrine describing the effect of former adjudications on

subsequent actions has a number of aspects, and is referred to by

a variety of terms, including res judicata, merger, bar, and

collateral and direct estoppel. See 18 CHARLES A. WRIGHT ET. AL.,

FEDERAL PRACTICE AND PROCEDURE § 4402 (1981) (tracing the varying

terminology employed in this area). Throughout this opinion we

use the phrases "issue preclusion" and "collateral estoppel"

interchangeably to refer to the rule, applicable to this action,

providing preclusive effect to a fact, question, or right

determined in a prior case.

0

Nearly a century ago, the first Justice Harlan eloquently set

forth the rationales supporting the application of issue

preclusion as follows:

The general principle announced in

numerous cases is that a right, question, or

fact distinctly put in issue, and directly

determined by a court of competent

jurisdiction, as a ground of recovery, cannot

be disputed in a subsequent suit between the

same parties or their privies; and, even if

the second suit is for a different cause of

action, the right, question, or fact once so

determined must, as between the same parties

or their privies, be taken as conclusively

established, so long as the judgment in the

first suit remains unmodified. This general

rule is demanded by the very object for which

civil courts have been established, which is

9

doctrine ensures that "once an issue is actually and necessarily

determined by a court of competent jurisdiction, that

determination is conclusive in subsequent suits based on a

different cause of action involving a party to the prior

litigation," Montana v. United States, 440 U.S. 147, 153, 99 S.

Ct. 970, 973 (1979). The prerequisites for the application of

issue preclusion are satisfied when: “(1) the issue sought to be

precluded [is] the same as that involved in the prior action; (2)

that issue was actually litigated; (3) it was determined by a

final and valid judgment; and (4) the determination [was]

essential to the prior judgment.” In re Graham, 973 F.2d 1089,

1097 (3d Cir. 1992) (quoting In re Braen, 900 F.2d 621, 628-29

n.5 (3d Cir. 1979), cert. denied 111 S. Ct. 782 (1991)).

Complete identity of parties in the two suits is not

required for the application of issue preclusion. Here Hyundai,

which was not a party to the first suit (the Atlantic Mutual

action), attempts to use issue preclusion offensively against

Burlington, which was a party in the first action. Such an

to secure the peace and repose of society by

the settlement of matters capable of judicial

determination. Its enforcement is essential

to the maintenance of social order; for the

aid of judicial tribunals would not be

invoked for the vindication of rights of

person and property if, as between parties

and their privies, conclusiveness did not

attend the judgments of such tribunals in

respect of all matters properly put in issue

and actually determined by them.

Southern Pacific R.R. v. United States, 168 U.S. 1, 48-49, 18 S.

Ct. 18, 27 (1897).

10

application of issue preclusion is referred to as offensive0 non-

mutual0 collateral estoppel, which has been recognized as proper

by the Supreme Court in Parklane Hosiery Co. v. Shore, 439 U.S.

322, 326, 99 S. Ct. 645, 649 (1979).0 The Court in Parklane

concluded that "a litigant who was not a party to a prior

judgment may nevertheless use that judgment ‘offensively’ to

prevent a defendant from relitigating issues resolved in the

earlier proceeding," id. at 326, 99 S. Ct. at 649, subject to an

overriding fairness determination by the trial judge.0

0

The offensive use of collateral estoppel "occurs when the

plaintiff seeks to foreclose the defendant from relitigating an

issue the defendant has previously litigated unsuccessfully in an

action with another party," while, in contrast, defensive use

"occurs when a defendant seeks to prevent a plaintiff from

asserting a claim the plaintiff has previously litigated and lost

against another defendant." Parklane Hosiery Co. v. Shore, 439

U.S. 322, 326 n.4, 99 S. Ct. 645, 649 n.4 (1979). Because the

indemnity claimant, Hyundai, seeks to prevent Burlington from

relitigating an issue that Burlington lost against a prior

claimant, OOCL, in a prior action, this case involves the

application of offensive collateral estoppel. The fact that

Burlington preemptively brought this action for declaratory

judgment, seeking to avoid indemnity liability, does not alter

the structural essence of the case.

0

It is non-mutual because OOCL and not Hyundai was the

plaintiff in the prior action. In Parklane Hosiery Co. v. Shore,

439 U.S. 322, 326-28, 99 S. Ct. 645, 651-52 (1979), the Supreme

Court disavowed a requirement of mutuality for issue preclusion

to bar a party from relitigating an issue.

0

Previously, in Blonder-Tongue Laboratories, Inc. v. University

of Illinois Foundation, 402 U.S. 313, 328-29, 91 S. Ct. 1434,

1442-43 (1971), the Supreme Court recognized defensive non-mutual

collateral estoppel, precluding a patentee from relitigating the

validity of a patent because a federal court in a previous

lawsuit had already declared the patent invalid.

0

In reaching this conclusion, however, the Parklane Court

recognized that two reasons, not implicated in the present

action, counseled against the application of offensive, as

opposed to defensive, non-mutual issue preclusion. First, its

availability could create an incentive for potential plaintiffs

"to adopt a `wait and see' attitude, in the hope that the first

11

B. The Exception for Unmixed Questions of Law

In this action, the parties did not dispute (with one

exception detailed in the margin) that all of the primary

requirements for application of non-mutual offensive collateral

action will result in a favorable judgment," since such

plaintiffs "will be able to rely on a previous judgment against a

defendant but will not be bound by that judgment if the defendant

wins." Id. at 330, 99 S. Ct. at 651. Second, offensive use of

collateral estoppel may be "unfair to a defendant," to the extent

that: (1) the defendant may have been sued in the first action

for "small or nominal damages" for which "he may have [had]

little incentive to defend vigorously, particularly if future

suits [were] not foreseeable"; (2) the "judgment relied upon for

a basis for the estoppel is itself inconsistent with one or more

previous judgments in favor of the defendant"; or (3) "the second

action affords the defendant procedural opportunities [e.g.

discovery procedures] unavailable in the first action that could

readily cause a different result." Id. at 330, 99 S. Ct. at 651.

Acknowledging these concerns the Parklane Court nevertheless

allowed trial courts to determine in proper cases that non-mutual

offensive collateral estoppel should be applied. The Court

stated that the "general rule" is "that in cases where a

plaintiff could easily have joined in the earlier action or

where, either for the reasons discussed above or for other

reasons, the application of offensive estoppel would be unfair to

a defendant, a trial judge should not allow the use of offensive

collateral estoppel." Id. at 331, 99 S. Ct. at 651-52.

Following Parklane, the Court in United States v.

Mendoza, 464 U.S. 154, 104 S. Ct. 568 (1984), limited the

application of offensive non-mutual collateral estoppel by

concluding that it could not be applied against the federal

government. The Court reasoned that such a policy "would

substantially thwart the development of important questions of

law by freezing the first final decision rendered on a particular

legal issue." Id. at 160, 104 S. Ct. at 572. The Court

explained that "[a]llowing one final adjudication would deprive

this Court of the benefit it receives from permitting several

courts of appeals to explore a difficult question before this

court grants certiorari." Id. "Indeed," the Court observed, "if

nonmutual estoppel were routinely applied against the Government,

this Court would have to revise its practice of waiting for a

conflict to develop before granting the Government’s petitions

for certiorari." Id.

12

estoppel were satisfied0 and the sole basis of the district

court’s decision not to apply issue preclusion in this action was

based on an exception for "unmixed question[s] of law." In this

appeal, Hyundai contends that the district court erred in

0

Burlington submits that the Atlantic Mutual decision, which

denied Burlington’s request for summary judgment, was not final

since it was "not appealable," and hence it cannot be granted

preclusive effect. The district court did not reach this

contention, choosing instead to rely on the exception for unmixed

questions of law. We reject Burlington’s argument.

As we recognized in In re Brown, 951 F.2d 564, 569 (3d

Cir. 1991), the concept of finality for purposes of "collateral

estoppel does not require the entry of a judgment final in the

sense of being appealable." Instead, "the doctrine of collateral

estoppel applies whenever an action is sufficiently firm to be

accorded conclusive effect." Id. (internal quotation marks

omitted). We concluded there that "[t]he wisest course [was] to

regard the prior decision of the issue as final for the purpose

of issue preclusion without awaiting the end judgment." Id.

Brown held that "[i]n determining whether the resolution was

sufficiently firm, the second court should consider whether the

parties were fully heard, whether a reasoned opinion was filed,

and whether that decision could have been, or actually was,

appealed." Id. (We admitted, however, that "[f]inality ‘may

mean little more than that the litigation of a particular issue

has reached such a stage that a court sees no really good reason

for permitting it to be litigated again.’" Id. (quoting Dyndul

v. Dyndul, 620 F.2d 409, 412 n.8 (3d Cir. 1980)).)

This finality requirement is satisfied in this case.

Burlington "w[as] represented by counsel (in this case two

separate firms), . . . [t]he issues were genuinely contested, and

the court gave no indication that the summary judgment was

tentative or likely to be changed." See Brown, 951 F.2d at 569.

Moreover, the Atlantic Mutual court did not summarily deny

Burlington’s summary judgment motion on (for example) grounds

that there were material factual disputes; rather, it ruled in a

reasoned opinion that Burlington’s timeliness defense was

unsuccessful as a matter of law. Under all these circumstances,

the fact that the decision was not actually appealable is of

little consequence in this action. See Dyndul, 620 F.2d at 412

("‘[F]inality’ for purposes of issue preclusion is a more

‘pliant’ concept than it would be in other contexts.").

Accordingly, we conclude that the denial of summary judgment in

Atlantic Mutual is sufficiently final to be given issue

preclusive effect in this action.

13

applying this exception, and in refusing to grant issue

preclusive effect to the decision of the United States District

Court for the Western District of Washington in Atlantic Mutual.

The viability and/or proper scope of the exception for "unmixed

questions of law" is an issue of first impression in this

Circuit.

The Restatement (Second) of Judgments defines the

exception for "unmixed questions of law" as follows:

§ 28. Exceptions to the General Rule

of Issue Preclusion

Although an issue is actually litigated and

determined by a valid and final judgment, and

the determination is essential to the

judgment, relitigation of the issue in the

subsequent action between the parties is not

precluded in the following circumstances:

(2) The issue is one of law and (a)

the two actions involve claims that

are substantially unrelated, or (2)

a new determination is warranted in

order to take account of an

intervening change in the

applicable legal context or

otherwise to avoid inequitable

administration of the laws.

RESTATEMENT (SECOND) OF JUDGMENTS § 28(2) (1982).0

0

A leading treatise suggests a similar framework for

determining whether the exception for "unmixed questions of law"

should apply. See 18 WRIGHT & MILLER, supra, § 4425, at 253-54

("Preclusion should not apply if there has been either a change

in the facts or the governing rules."). This framework proceeds

as follows: First, the treatise suggests that preclusion should

not apply unless "[i]dentity of the issue is established by

showing that the same general legal rules govern both cases and

that the facts of both cases are indistinguishable as measured by

those rules." Id. (footnotes omitted). Second, it states that

"[p]reclusion also may be defeated by showing either that special

reasons make it inappropriate in a particular legal setting, or

14

This exception to the doctrine of issue preclusion has

its roots in a statement made by the Supreme Court over seventy

years ago in United States v. Moser, 266 U.S. 236, 45 S. Ct. 66

(1924). Moser was a retired Navy captain, who successfully

contended, in an initial case before the U.S. Court of Claims,

that time spent as a Naval Academy cadet during the Civil War

qualified as "serv[ice] during the civil war", entitling him to a

pension enhancement under an applicable pension statute. Moser,

266 U.S. at 240, 45 S. Ct. at 66. In a later case, which did not

involve Moser, the Court of Claims changed its interpretation of

the pension statute and concluded that service as a naval cadet

did not qualify as "serv[ice] during the war" under the statute.

Id. Notwithstanding this change in the law, in subsequent

actions brought by Moser for later installments of his enhanced

pension benefits, the Court of Claims relied on, inter alia, the

doctrine of issue preclusion to permit Moser to continue to

receive the enhanced pension benefits. The government appealed,

and the Supreme Court affirmed the application of issue

preclusion.

In Moser, the Court addressed, and rejected, the

contention that issue preclusion should not apply on the ground

that a pure question of law was involved:

The contention of the Government seems to be

that the doctrine of res judicata does not

apply to questions of law; and, in a sense,

that is true. It does not apply to unmixed

that there has been a substantial change in the legal climate

that suggests a new understanding of the governing legal rules

which may require a different application." Id. (footnotes

omitted).

15

questions of law. Where, for example, a

court in deciding a case has enunciated a

rule of law, the parties in a subsequent

action upon a different demand are not

estopped from insisting that the law is

otherwise, merely because the parties are the

same in both cases. But a fact, question or

right distinctly adjudged in the original

action cannot be disputed in a subsequent

action, even though the determination was

reached upon an erroneous view or by an

erroneous application of the law. That would

be to affirm the principle in respect of the

thing adjudged but, at the same time, deny it

all efficacy by sustaining a challenge to the

grounds upon which the judgment was based.

Id. at 242, 45 S. Ct. at 67. Thus the Court concluded that

"[t]he question expressly and definitely presented in this suit

is the same as that definitely and actually litigated and

adjudged in favor of the claimant in the three preceding suits,

viz: whether he occupied the status of an officer who had served

during the civil war." Id. at 242, 45 S. Ct. at 67. For this

reason, the Court concluded issue preclusion was proper.

The Supreme Court next addressed the possible

application of this exception some fifty-five years later in

Montana v. United States, 440 U.S. 147, 99 S. Ct. 970 (1979), a

case of mutual defensive collateral estoppel which involved

successive Supremacy Clause challenges to Montana’s imposition of

a one percent gross receipts tax on public, but not private,

construction projects. In the initial action, a public

contractor, financed by the federal government, litigated the

constitutionality of the tax in state court. The Montana Supreme

Court unanimously upheld the tax. Instead of seeking certiorari,

16

the government, acting on its own behalf, brought a similar

challenge in the federal district court in Montana, and that case

reached the Supreme Court.

The Supreme Court determined that, under these

circumstances, mutuality of parties existed since the government,

which directed the litigation on behalf of the public contractor

in the first action, was, for all practical purposes, the party

in the first action. The Court affirmed the defensive use of

mutual collateral estoppel against the federal government since

the issue sought to be litigated was identical to the issue

already litigated in the state court action and no change in

controlling facts or legal principles had occurred. Id. at 155-

62, 99 S. Ct. at 974-78. The Court rejected the contention that

issue preclusion should not apply under an exception for "unmixed

question of law":

Of possible relevance is the exception which

obtains for "unmixed questions of law" in

successive actions involving substantially

unrelated claims. . . .

. . . .

. . . [W]hen issues of law arise in

successive actions involving unrelated

subject matter, preclusion may be

inappropriate. This exception is of

particular importance in constitutional

adjudication. Unreflective invocation of

collateral estoppel against parties with an

ongoing interest in constitutional issues

could freeze doctrine in areas of the law

where responsiveness to changing patterns of

conduct or social mores is critical. To be

sure, the scope of the Moser exception may be

difficult to delineate, particularly where

there is partial congruence in the subject

matter of successive disputes. But the

instant case poses no such conceptual

difficulties. Rather, as the preceding

17

discussion indicates, the legal "demands" of

this litigation are closely aligned in time

and subject matter to those in [the previous

litigation].

Id. at 162-63, 99 S. Ct. at 978 (citations omitted).

The Supreme Court most recently addressed the proper

scope of this exception in United States v. Stauffer Chemical

Co., 464 U.S. 165, 104 S. Ct. 575 (1984), which involved

successive actions brought by the EPA against Stauffer in

response to the company’s refusal to submit to inspections by

private contractors hired by the EPA. At issue was whether

private contractors were "authorized representatives" under

§ 114(a)(2) of the Clean Air Act. In the initial action, which

involved an attempt by the EPA to inspect Stauffer's Wyoming

plant, the Tenth Circuit held for Stauffer, concluding that

private contractors were not "authorized representatives" under

the statute. The identical question then arose with regard to an

EPA inspection of Stauffer's Tennessee plant, leading the Sixth

Circuit to conclude, inter alia, that the federal government was

estopped from relitigating the question whether private

contractors constituted authorized representatives under the

Clean Air Act.

The government appealed and the Supreme Court affirmed,

concluding "that the doctrine of mutual defensive collateral

estoppel is applicable against the Government to preclude

relitigation of the same issue already litigated against the same

party in another case involving virtually identical facts." Id.

at 169, 104 S. Ct. at 578. In so doing it rejected the

18

government’s reliance on an exception for "unmixed questions of

law" and expressed serious doubt regarding the proper scope of

the exception:

While our discussion in Montana indicates

that the exception is generally recognized,

we are frank to admit uncertainty as to its

application. The exception seems to require

a determination as to whether an "issue of

fact" or an "issue of law" is sought to be

relitigated and then a determination as to

whether the "issue of law" arises in a

successive case that is so unrelated to the

prior case that relitigation of the issue is

warranted. Yet we agree that, for the

purpose of determining when to apply an

estoppel, when the claims in two separate

actions between the same parties are the same

or are closely related it is not ordinarily

necessary to characterize an issue as one of

fact or of law for purposes of issue

preclusion. In such a case, it is unfair to

the winning party and an unnecessary burden

on the courts to allow repeated litigation of

the same issue in what is essentially the

same controversy, even if the issue is

regarded as one of "law."

Id. at 171, 104 S. Ct. at 579 (internal quotation marks and

citations omitted). The Court further explained that “[a]n

exception which requires a rigid determination of whether an

issue is one of fact, law, or mixed fact and law, as a practical

matter, would often be impossible to apply because the journey

from a pure question of fact to a pure question of law is one of

subtle gradations rather than one marked by a rigid divide.” Id.

at 171 n.4, 104 S. Ct. at 579 n.4.

Hyundai contends that given these statements, the

Stauffer Court effectively overruled the issue preclusion

exception for "unmixed questions of law." We disagree. Despite

19

its diffidence and ruminations, we do not believe that the

Court’s decision in Stauffer overruled the exception for unmixed

questions of law as set forth in the Restatement and by Wright &

Miller. See 18 WRIGHT & MILLER, supra, § 4425, at 198 (1994 Supp.)

("The approach suggested in the main volume is supported by the

result reached in United States v. Stauffer Chem. Co." (footnote

omitted)).0

In Stauffer, the Court found the prerequisites for the

exception for unmixed questions of law unsatisfied. The Court

determined that neither of the two elements justifying

application of the exception to issue preclusion for unmixed

questions of law were present: "The Government does not argue

that the § 114(a)(2) issues in Stauffer I and Stauffer II are

dissimilar nor that controlling law or facts have changed since

Stauffer I." Stauffer, 464 U.S. at 170, 104 S. Ct. at 578. In

0

With regard to Stauffer, Wright and Miller have acknowledged

that

it remains unclear just where the Court’s

opinion will lead. It is confessed that

there is no clear sense of the purposes that

may limit preclusion as to matters of law.

No attempt is made to work through the

different policies that may apply in

different settings, so as to push preclusion

closer to abstract issues of law or to

confine it closer to commingled issues of law

and common fact. The result might be a broad

expansion of preclusion. The reasons for

caution are sufficiently strong, however, to

rely on the opinion as a possibly appropriate

response to the specific case without reading

it as establishing a new general policy.

18 WRIGHT & MILLER, supra, § 4425, at 198 (1994 Supp.).

20

particular, the Court analogized to its decision in Montana,

where it "determined that the exception was inapplicable because

of the close alignment of time and subject matter between the

[two actions],"0 id. at 172, 104 S. Ct. at 579. The Court

reasoned in Stauffer that "[a]ny factual differences between the

two cases [the prior and instant adjudications], such as the

difference in the location of the plants and the difference in

the private contracting firms involved, are of no legal

significance whatever in resolving the issue presented in both

cases." Id. at 172, 104 S. Ct. at 579.

Admitting that "the purpose underlying the exception

for ‘unmixed questions of law’ in successive actions on unrelated

claims is far from clear," id., the Court concluded: "whatever

its purpose or extent, we think that there is no reason to apply

it here . . ., [and doing so] would substantially frustrate the

doctrine's purpose of protecting litigants from burdensome

relitigation and of promoting judicial economy." Id. Moreover,

the Court rejected the government’s argument that "two cases

presenting the same legal issue must arise from the very same

0

In particular, the court reasoned:

Both Stauffer I and Stauffer II arose as a

result of EPA's overview inspection program

for supervising state efforts to enforce

national air quality standards. In both

cases private contractors, in addition to EPA

and state employees, tried to inspect plants

owned by respondent. The inspections

occurred just over two weeks apart, and in

each case, Stauffer refused to allow the

private contractors to enter its plant.

Id. at 579.

21

facts or transaction before an estoppel can be applied." Id. at

172 n.5, 104 S. Ct. at 579 n.5. "Whatever applicability that

interpretation may have in the tax context, see Commissioner v.

Sunnen, 333 U.S. 591, 601-602 (1948) (refusing to apply an

estoppel when two tax cases presenting the same issue arose from

‘separable facts’), [the Court] reject[ed] its general

applicability outside of that context." Id.0

In sum, the Stauffer opinion is consistent with the

approach codified in the Restatement. See Clark-Cowlitz Joint

Operating Agency v. F.E.R.C., 775 F.2d 366, 375 (D.C. Cir. 1985)

(recognizing after the Court’s decision in Stauffer that "the

test for the exception seems to be . . . whether ‘the issue of

law arises in a successive case that is so unrelated to the prior

case that relitigation of the issue is warranted.’" (quoting

Stauffer, 464 U.S. at 171, 104 S. Ct. at 579)); see also 18 WRIGHT

0

Justice White concurred in the judgment in Stauffer to stress

the fact that at the time of Stauffer II, the Sixth Circuit had

not yet ruled on the substantive issue whether private

contractors were "authorized representatives" under the Clean Air

Act. According to Justice White, preclusion would not have been

appropriate had the Sixth Circuit already clearly resolved the

legal issue in question:

Extending preclusion to circuits that have

adopted a contrary rule on the merits would

be acceptable were it supported by any

affirmative policy. It is not. Judicial

economy is not served for the simple reason

that no litigation is prevented; the prior

litigant is subject to one black-letter rule

rather than another.

Stauffer, 464 U.S. at 178, 104 S. Ct. at 582.

22

& MILLER, supra, § 4425, at 199 (Supp. 1994) ("The reasons for

caution are sufficiently strong . . . to rely on the opinion

[Stauffer] as a possibly appropriate response to the specific

case without reading it as establishing a new general policy.").

In sum, the exception continues to apply following Stauffer.

C. Application of the Unmixed Questions of Law Doctrine

The exception to the application of issue preclusion

for unmixed questions of law is satisfied, as we have explained,

only when the previously determined issue is one of law, and

either (1) "the two actions involve claims that are substantially

unrelated" or (2) "a new determination is warranted in order to

take account of an intervening change in the applicable legal

context or otherwise to avoid inequitable administration of the

laws." RESTATEMENT (SECOND) OF JUDGMENTS § 28(2). We take up the two

facets of the exception in turn.

1. Substantial Relationship

In determining whether two cases involve claims that

are "substantially unrelated," we must assess whether the two

cases involve the same application of law. A party cannot

satisfy the “substantially unrelated claim” test where "the same

general legal rules govern both cases and . . . the facts of both

cases are indistinguishable as measured by those rules." 18

WRIGHT & MILLER, supra, § 4425, at 253-54 (footnotes omitted). As

the Supreme Court recognized in Stauffer, issue preclusion does

not require that the "two cases presenting the same legal issue

must arise from the very same facts or transaction before an

estoppel can be applied." Stauffer, 464 U.S. at 172 n.5, 104 S.

23

Ct. at 579 n.5. In fact, estoppel will be applied unless "the

‘issue of law’ arises in a successive case that is so unrelated

to the prior case that relitigation of the issue is warranted."

Id. (emphasis added).

The Atlantic Mutual case, like this one, involved the

denial of an indemnity claim by Burlington based solely on a

Burlington contention that the claim was time barred because the

claimant, in that case OOCL, had failed to provide notice of its

claim within a time period specified in Burlington Rules

Memorandum 2-C. And, like the provision in this action, the

provision in Atlantic Mutual measured the limitations period from

the date of delivery.0 Like Hyundai’s claim here, the viability

of OOCL’s claim in the Atlantic Mutual action turned on the

question whether the general rule for indemnity accrual and the

concomitant commencement of limitations periods should apply

regardless of a contractually defined period. As we have stated,

the Atlantic Mutual court, relying on Ninth Circuit precedent,

concluded that a "[]claim for indemnification is not barred by

the limitations period in Burlington Northern’s Rules Memorandum

2-C," Atlantic Mutual at *12, since "an action for

indemnification accrues at the time of the indemnitee’s payment

despite a shorter contractual time limitations period applying to

0

Burlington’s clause in Atlantic Mutual provided that "all suits

against BN [Burlington Northern] shall be commenced no later than

1 year after the date of delivery." Atlantic Mutual at *5. In

this case, the limitations clause specified that "any claim for

loss or damage to lading shall be filed with BN [Burlington

Northern] within nine (9) months of the date of delivery of the

shipment." App. at 107.

24

claims between the parties," id. (citing States S.S. Co. v.

American Smelting & Refining Co., 339 F.2d at 70 (9th Cir.

1964)).

In our view, the issue of law arising in this action is

not "so unrelated" to the decision of the court in Atlantic

Mutual "that relitigation of the issue is warranted." Stauffer,

464 U.S. at 171, 104 S. Ct. at 579. Indeed, the issue and its

application are identical. Hyundai, like OOCL, seeks to recover

in indemnity from Burlington on the grounds that a limitations

period prohibiting shipment damage claims presented beyond a

specified time cannot start running until the time that liability

is determined or a cognizable loss is incurred, since actions in

indemnity do not accrue until such time. If this rule for the

accrual of actions in indemnity were applied in the present

action Hyundai’s claim would have been timely presented, like

OOCL’s claim against Burlington in the Atlantic Mutual action.

While, as Burlington points out, the contractual

limitations provision in this case provides for a shorter period

of time (nine months as opposed to one year), and applies to the

presentation of "claims" as compared to the filing of "suits,"

these distinctions are of no legal significance to the issue

decided in Atlantic Mutual and presented here. In both cases

Burlington denied the indemnity claims on the grounds that they

were untimely because the contract term limited liability to a

period of time (commencing at the date of delivery) that had

already run. Similarly, in both actions, the indemnity claimant

sought recovery notwithstanding such provision on the grounds

25

that any time limit for indemnity claims must commence when

liability is determined or a cognizable loss is incurred. In

sum, given these relevant similarities, we cannot conclude that

the issue of law arising in this action is so unrelated to the

Atlantic Mutual case that relitigation of the issue is

warranted.0

2. Intervening Change and Inequitable Administration

When two actions involve claims that are not

"substantially unrelated," issue preclusion still does not apply

to an issue of law if a new determination of the legal issue is

warranted "in order to take account of an intervening change in

the applicable legal context or otherwise to avoid inequitable

administration of the laws." See Haitian Ctrs. Council, Inc. v.

McNary, 969 F.2d 1350, 1356 (2d Cir. 1992) (quoting RESTATEMENT

(SECOND) OF JUDGMENTS § 28(2) (internal quotation marks omitted)),

rev'd on other grounds sub. nom. Sale v. Haitian Ctrs. Council,

0

This conclusion accords with the decision of the Fifth Circuit

Court of Appeals in Hicks v. Quaker Oats Co., 662 F.2d 1158, 1167

n.4 (5th Cir. 1981), which reasoned that non-mutual offensive

collateral estoppel should apply "‘if the question is one of the

legal effect of a document identical in all relevant respects to

another document whose effect was adjudicated in a prior

action.’" Id. at 1167 n.4 (quoting RESTATEMENT (SECOND) OF JUDGMENTS

§ 68, Reporter’s Note cmt. c at 18-19 (Tent. Draft No. 4, Apr.

15, 1977)). The Hicks decision involved successive actions by

former employees of Quaker Oats for benefits under a special

retirement program. At issue in both actions was whether a

letter from a member of Quaker Oats management announcing the

terms for a special new retirement plan was enforceable as a

binding bilateral contract. While the court ultimately ruled

that the first decision should not be given collateral estoppel

effect because the initial decision was based on an alternative

ground, the court first rejected the argument "that estoppel

should not apply because the erroneous holding of contractual

liability is a pure question of law." Hicks, 662 F.2d at 1166.

26

113 S. Ct. 2549 (1993); see also Haitian Ctrs., 969 F.2d at 1356

("‘Relitigation of an issue of public importance should not be

precluded when there has been an intervening change in the

applicable legal context.’" (quoting Kania v. Fordham, 702 F.2d

475, 476 n. 2 (4th Cir. 1983) (internal quotation marks

omitted)); Montana, 440 U.S. at 163, 99 S. Ct. at 978

("Unreflective invocation of collateral estoppel . . . could

freeze doctrine in areas of the law where responsiveness to

changing patterns of conduct or social mores is critical."). No

such concerns are present in this case.

Burlington does not point to, and we are unaware of,

any intervening change in the applicable legal context which

would warrant new consideration of the issue decided against

Burlington in Atlantic Mutual. Moreover, application of issue

preclusion in this case would not constitute an inequitable

administration of the laws. Burlington was aware of Hyundai’s

claim at the time of the Atlantic Mutual litigation, and it had a

full and fair opportunity to litigate the legal issue in the U.S.

District Court for the Western District of Washington.

We also believe that application of issue preclusion is

particularly appropriate in this case, given that reconsideration

of the issue already addressed in Atlantic Mutual would reward

Burlington’s attempt to forum shop. See Fulani v. Bensten, 862

F. Supp. 1140, 1151 (S.D.N.Y. 1994) ("To rule otherwise would

encourage the parties to forum shop, thereby undermining the

purpose of collateral estoppel in promoting the finality of

judgments."). By instituting this action for declaratory

27

judgment in New Jersey, Burlington seeks to avoid the result that

would have been reached in a court within the Ninth Circuit,

where this case would more properly have been brought since the

facts and parties to this action have virtually no connection to

New Jersey.0

Having already litigated and lost this issue within the

Ninth Circuit in Atlantic Mutual, Burlington now attempts to

institute another action raising the same issue within another

federal circuit in the hopes that this court would reach a

conclusion different from that previously reached. But, as we

have stated, "once an issue is actually and necessarily

determined by a court of competent jurisdiction, that

determination is conclusive in subsequent suits based on a

different cause of action involving a party to the prior

litigation." Montana, 440 U.S. at 153, 99 S. Ct. at 973.

Accordingly, Burlington cannot now relitigate this issue that it

already contested and lost in Atlantic Mutual. Issue preclusion

applies.0

0

None of the facts underlying this action occurred in New

Jersey and neither of the parties are incorporated or have a

principal place of business in New Jersey. The underlying case

involves indemnity for a damage claim originating from a shipment

traveling from Milwaukee, Wisconsin, to Pusan, South Korea via

Seattle, Washington, and the litigation from which the indemnity

claim arose was within the Ninth Circuit. See Tongil Co. v.

Vessel Hyundai Innovator, 968 F.2d 999 (9th Cir. 1992).

0

As mentioned, supra note 12, Justice White concurred in

Stauffer so as to stress the fact that issue preclusion should

not be applied within a Circuit where the Court of Appeals had

already clearly ruled on the substantive legal issue. We need

not address this concern, since this court has yet to directly

opine on the substantive issue implicated by this case -- whether

a contract provision can, consistent with COGSA and its

28

III. CONCLUSION

For the foregoing reasons, we will reverse the order of

the district court granting summary judgment to Burlington, and

remand the case with the direction to grant issue preclusive

effect to the applicable legal issue resolved by the District

Court for the Western District of Washington in the Atlantic

Mutual litigation.

amendments, override the general common law rule governing

accrual of claims and running of statute of limitations in

indemnity actions. See National Post Office Mail Handlers v.

American Postal Workers Union, 907 F.2d 190, 194 (D.C. Cir. 1990)

("The doctrine of issue preclusion counsels us against reaching

the merits in this case, . . . regardless of whether we would

reject or accept our sister circuit’s position.").

29