Monat v. State Farm Insurance

Michigan Supreme Court

Lansing, Michigan 48909

Chief Justice Justices

Opinion

Maura D. Corrigan Michael F. Cavanagh

Elizabeth A. Weaver

Marilyn Kelly

Clifford W. Taylor

Robert P. Young, Jr.

Stephen J. Markman

FILED APRIL 22, 2004

FRANK MONAT,

Plaintiff-Appellee,

v No. 121122

STATE FARM INSURANCE COMPANY,

Defendant-Appellant.

_______________________________

BEFORE THE ENTIRE BENCH

MARKMAN, J.

We granted leave to appeal in this case to examine the

mutuality requirement of the doctrine of collateral

estoppel. In this first-party, no-fault action, defendant

seeks to invoke collateral estoppel to preclude plaintiff

from relitigating an issue already decided in plaintiff’s

third-party negligence action. Due only to a lack of

mutuality, the Court of Appeals, in a split decision,

affirmed the trial court’s denial of defendant’s motion for

summary disposition. We hold that, where collateral

estoppel is being asserted defensively against a party who

has already had a full and fair opportunity to litigate the

issue, mutuality is not required. Further, because we

believe that this test has been satisfied, we reverse the

decision of the Court of Appeals, remand this case to the

trial court, and order that court to grant defendant’s

motion for summary disposition.

I. BACKGROUND

While stopped at a traffic light, plaintiff’s vehicle

was rear-ended by another vehicle. Plaintiff claims to

have suffered serious injuries as a result of this

accident. Defendant, plaintiff’s no-fault insurer, paid

personal injury protection (PIP) benefits, but stopped

paying such benefits shortly after plaintiff filed a third-

party negligence action against the driver of the other

vehicle. Plaintiff then filed this first-party action

against defendant for PIP benefits.

The third-party action proceeded to trial, where,

prior to trial, both parties entered into an agreement to

forgo their opportunity to appeal in lieu of plaintiff

agreeing to place a cap on damages and defendant agreeing

to pay plaintiff an undisclosed sum of damages regardless

of the jury’s verdict. That trial ended with a “no cause

of action” verdict after the jury specifically found

plaintiff not to have been injured. Following this

verdict, defendant moved for summary disposition in the

2

first-party action. Defendant asserted that the doctrine

of collateral estoppel precluded plaintiff’s first-party

claim because plaintiff litigated and lost the issue of

injury in the third-party action. The trial court denied

defendant’s motion.

The Court of Appeals, in a split opinion, affirmed the

trial court’s decision.1 The majority concluded that the

doctrine of collateral estoppel could not apply because

mutuality of estoppel was absent. The dissenting judge,

however, opined that the mutuality requirement should be

relaxed in cases such as this and, thus, would have applied

the doctrine of collateral estoppel.

II. STANDARD OF REVIEW

A trial court’s decision to grant or deny a motion for

summary disposition is reviewed de novo. Stanton v Battle

Creek, 466 Mich 611, 614; 647 NW2d 508 (2002).

III. ANALYSIS

Under the no-fault act, defendant is obligated to pay

plaintiff benefits for “bodily injury arising out of the

ownership, operation, maintenance or use of a motor vehicle

. . . .” MCL 500.3105(1). Defendant asserts that the

doctrine of collateral estoppel applies, and thus it is not

1

Unpublished opinion per curiam, issued February 15,

2002 (Docket No. 222690).

3

liable to pay plaintiff PIP benefits because plaintiff was

found not to have been injured in the third-party action.

Generally, for collateral estoppel to apply three

elements must be satisfied: (1) “a question of fact

essential to the judgment must have been actually litigated

and determined by a valid and final judgment”; (2) “the

same parties must have had a full [and fair] opportunity to

litigate the issue”;2 and (3) “there must be mutuality of

2

In determining whether a party has had a “full and

fair” opportunity to litigate an issue, courts should look

to the factors set forth in 1 Restatement Judgments, 2d, ch

3, Former Adjudication, §§ 28-29. Section 28, p 273,

provides:

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 a subsequent action

between the parties is not precluded in the

following circumstances:

(1) The party against whom preclusion is

sought could not, as a matter of law, have

obtained review of the judgment in the initial

action; or

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

actions involve claims that are substantially

unrelated, or (b) 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; or

(3) A new determination of the issue is

warranted by differences in the quality or

extensiveness of the procedures followed in the

two courts or by factors relating to the

allocation of jurisdiction between them; or

(4) The party against whom preclusion is

sought had a significantly heavier burden of

4

persuasion with respect to the issue in the

initial action than in the subsequent action; the

burden has shifted to his adversary; or the

adversary has a significantly heavier burden than

he had in the first action; or

(5) There is a clear and convincing need for

a new determination of the issue (a) because of

the potential adverse impact of the determination

on the public interest or the interests of

persons not themselves parties in the initial

action, (b) because it was not sufficiently

foreseeable at the time of the initial action

that the issue would arise in the context of a

subsequent action, or (c) because the party

sought to be precluded, as a result of the

conduct of his adversary or other special

circumstances, did not have an adequate

opportunity or incentive to obtain a full and

fair adjudication in the initial action.

Section 29, p 291, provides:

A party precluded from relitigating an issue

with an opposing party . . . is also precluded

from doing so with another person unless the fact

that he lacked a full and fair opportunity to

litigate the issue in the first action or other

circumstances justify affording him an

opportunity to relitigate the issue. The

circumstances to which considerations should be

given include those enumerated in § 28 and also

whether:

(1) Treating the issue as conclusively

determined would be incompatible with an

applicable scheme of administering the remedies

in the actions involved;

(2) The forum in the second action affords

the party against whom preclusion is asserted

procedural opportunities in the presentation and

determination of the issue that were not

available in the first action and could likely

result in the issue being differently determined;

(3) The person seeking to invoke favorable

preclusion, or to avoid unfavorable preclusion,

could have effected joinder in the first action

between himself and his present adversary;

5

estoppel.” Storey v Meijer, Inc, 431 Mich 368, 373 n 3;

429 NW2d 169 (1988). “[M]utuality of estoppel requires

that in order for a party to estop an adversary from

relitigating an issue that party must have been a party, or

in privy to a party, in the previous action. In other

words, ‘[t]he estoppel is mutual if the one taking

(4) The determination relied on as

preclusive was itself inconsistent with another

determination of the same issue;

(5) The prior determination may have been

affected by relationships among the parties to

the first action that are not present in the

subsequent action, or apparently was based on a

compromise verdict or finding;

(6) Treating the issue as conclusively

determined may complicate determination of issues

in the subsequent action or prejudice the

interest of another party thereto;

(7) The issue is one of law and treating it

as conclusively determined would inappropriately

foreclose opportunity for obtaining

reconsideration of the legal rule upon which it

was based;

(8) Other compelling circumstances make it

appropriate that the party be permitted to

relitigate the issue.

We note further that the United States Supreme Court

has observed in this regard as follows:

Determining whether a [party] has had a full

and fair chance to litigate [an issue] in an

earlier case is of necessity not a simple matter

[because] . . . as so often is the case, no one

set of facts, no one collection of words or

phrases, will provide an automatic formula for

proper rulings on estoppel pleas. In the end,

[the] decision will necessarily rest on the trial

courts’ sense of justice and equity. [Blonder-

Tongue Laboratories, Inc v Univ of Illinois

Foundation, 402 US 313, 333-334; 91 S Ct 1434; 2

L Ed 2d 788 (1971).]

6

advantage of the earlier adjudication would have been bound

by it, had it gone against him.’” Lichon v American

Universal Ins Co, 435 Mich 408, 427; 459 NW2d 288 (1990),

quoting Howell v Vito’s Trucking & Excavating Co, 386 Mich

37, 43; 191 NW2d 313 (1971).

Plaintiff has had a full and fair opportunity to

litigate the issue concerning his alleged injury. The

general rule permits relitigation when “[t]he party against

whom preclusion is sought could not, as a matter of law,

have obtained review of the judgment in the initial action

. . . .” Restatement § 28(1)(emphasis added). Here,

however, plaintiff voluntarily surrendered his opportunity

for appellate review, to which he had been entitled as a

matter of law. See, e.g., Greenleaf v Garlock, Inc, 174

F3d 352, 359 (CA 3, 1999). Plaintiff, who has been

represented by counsel throughout the entire litigation

process, agreed prior to trial of the third-party action to

forgo his opportunity for appeal the jury’s verdict in lieu

of the third-party defendant agreeing to pay plaintiff an

undisclosed sum of damages regardless of such verdict.

This is, we believe, properly understood as a waiver of any

appeal. While the “full and fair opportunity to litigate”

normally encompasses the opportunity to both litigate and

appeal, plaintiff here voluntarily relinquished the

opportunity to pursue an appeal in return for

7

consideration—the guaranteed receipt of a minimal sum of

damages regardless of the jury’s verdict. Further,

plaintiff’s decision to forgo any appeal was a wise

tactical decision because, as a result of this agreement,

plaintiff received an undisclosed sum of damages even

though the jury concluded that he had suffered no injury.3

While this agreement guaranteed that plaintiff would

receive such damages regardless of the jury’s verdict,

there remained nonetheless the possibility that the jury

might have awarded a greater award. This possibility

afforded sufficient incentive for plaintiff’s vigorous

advocacy regarding the injury question in the initial

litigation. Moreover, to describe this type of agreement

as anything other than “full and fair” would be to

encourage a plaintiff to negotiate away appeals with one

defendant while keeping in suspense other lawsuits in the

event that plaintiff’s first lawsuit proves unsuccessful.

Overlooking, however, the fact that plaintiff has had

a full and fair opportunity to litigate the injury issue in

3

In response to plaintiff’s attorney’s assertion that

plaintiff “should not be punished just because he entered

into a settlement to his benefit,” the trial court

responded that, in light of this agreement, plaintiff “was

the happiest guy on earth when he heard the jury speak. So

was his lawyer.”

8

this case,4 the dissent accepts plaintiff’s argument that he

is now entitled to another full and fair opportunity to

litigate exactly the same issue only because mutuality of

estoppel does not exist. As asserted by the dissent, the

general rule supports such an argument—collateral estoppel

precludes relitigation and imposes “‘a state of finality to

litigation where the same parties have previously had a

full and fair opportunity to adjudicate their claims.’”

Post at 2, quoting Nummer v Dep’t of Treasury, 448 Mich

534, 541; 533 NW2d 250 (1995).

However, as the dissent acknowledges, there is a

modern trend among the states to recognize exceptions to

the mutuality requirement. Moreover, contrary to the

4

Although the dissent fails to identify any reason why

it believes plaintiff here did not have a "full and fair

opportunity" to litigate the injury issue in the prior

case, the dissent nonetheless criticizes the second prong

of the majority’s test, stating that any method used to

determine whether a party against whom collateral estoppel

is asserted defensively had a full and fair opportunity to

litigate the issue in a prior case is based on an “‘ad hoc

formulation of . . . innumerable and unmanageable

factors.’” Post at 5, quoting Howell, supra at 51. While

we agree that a court must “proceed cautiously” when

determining whether this prong has been satisfied, 47 Am

Jur 2d, Judgments, § 651, p 60, quoting McCoy v Colonial

Baking Co, Inc, 572 So 2d 850, 854 (Miss, 1990), we do not

believe that the factors set forth in the Restatement are

“innumerable or unmanageable” as evidenced by the fact that

not only has the dissent failed to identify any reason it

believes such factors are “innumerable and unmanageable,”

but the numerous courts that have repeatedly applied these

factors have never found them “innumerable and

unmanageable.” See 47 Am Jur 2d, Judgments, §§ 651-652, pp

59-68.

9

dissent, this Court has not “consistently and explicitly

declined the invitation to follow the modern trend” of

abandoning, in part, the mutuality requirement. Post at 4.5

Rather, we have expressly recognized that “lack of

mutuality does not always preclude the application of

collateral estoppel. There are several well-established

5

Although the dissent cites Howell for the proposition

that this Court has refused to abandon any part of

mutuality of estoppel, post at 4-5, this Court in Howell

only refused to abandon mutuality of estoppel where

collateral estoppel was asserted offensively. Howell,

supra at 48. In fact, it appears that, had this Court in

Howell been presented with the issue raised here regarding

defensive use of collateral estoppel, the Court may well

have abandoned mutuality of estoppel where it is asserted

defensively against a party who has already had a full and

fair opportunity to litigate the issue in a prior suit:

Although there may be merit to Justice

Traynor’s observation in Bernhard [v Bank of

American Nat’l Trust & Savings Ass’n, 19 Cal 2d

807; 122 P2d 892 (1942)] that the well-recognized

exceptions to the mutuality rule in effect

produce the same result as unilateral estoppel or

non-mutuality, it should be noted that the

recognized exceptions are confined to defensive

pleading of collateral estoppel . . . . This fact

is quite significant in determining whether

collateral estoppel should or should not apply .

. . "The courts are more inclined to permit the

defensive, than the offensive, use of the

doctrine of collateral estoppel.” [Howell, supra

at 47 n 7 (citation omitted).]

We believe the clear import of Howell is to allow

defensive collateral estoppel where mutuality does not

exist. Indeed, a reading of Howell makes any other

conclusion difficult, given that the Court there said that

the fact of whether collateral estoppel is pleaded

offensively or defensively “is quite significant.” Id. If

mutuality were always required, the manner of pleading

collateral estoppel would be of no significance.

10

exceptions to the mutuality requirement, such as when an

indemnitor seeks to assert in its defense a judgment in

favor of its indemnitee, or where a master defends by

asserting a judgment for a servant.” Lichon, supra at 428

n 16.6

Although the circumstances of the instant case are

distinct from those addressed in Lichon, we now expand the

exceptions to the requirement of mutuality of estoppel to

encompass these circumstances. In our judgment, allowing

the defensive use of collateral estoppel in these

circumstances would enhance the efficient administration of

justice and ensure more consistent judicial decisions.

As early as 1942, the California Supreme Court

abandoned mutuality of estoppel altogether on the ground

that “it would be unjust to permit one who has had his day

in court to reopen identical issues . . . .” Bernhard v

6

Because the Court in Lichon held that “collateral

estoppel [was] unavailable to [defendant] because the issue

. . . was never actually litigated,” Lichon, supra at 428,

we believe that, whatever we said in Lichon concerning

mutuality, was dictum. Further, in accord with our

analysis of Howell, n 5, what the Court in Lichon said

concerning mutuality was in error because the Court in

Howell did not generally reaffirm its commitment to

mutuality.

11

Bank of America Nat’l Trust & Savings Ass’n, 19 Cal 2d 807,

813; 122 P2d 892 (1942).7 In Bernhard, the court stated:

The criteria for determining who may assert

a plea of res judicata differ fundamentally from

the criteria for determining against whom a plea

of res judicata may be asserted. The

requirements of due process of law forbid the

assertion of a plea of res judicata against a

party unless he was bound by the earlier

litigation in which the matter was decided. He

is bound by that litigation only if he has been a

party thereto or in privity with a party thereto.

There is no compelling reason, however, for

requiring that the party asserting the plea of

res judicata must have been a party, or in

privity with a party, to the earlier litigation.

[Id. at 811-812 (citations omitted).]

The United States Supreme Court in Blonder-Tongue

Labs, Inc v Univ of Illinois Foundation, 402 US 313, 323-

324; 91 S Ct 1434; 2 L Ed 2d 788 (1971), relied extensively

on the Bernhard reasoning in holding that mutuality is not

required where collateral estoppel is asserted defensively

and where the plaintiff has already had a full and fair

opportunity to litigate the issue. The Court stated:

The courts have often discarded the rule

while commenting on crowded dockets and long

delays preceding trial. Authorities differ on

whether the public interest in efficient judicial

administration is a sufficient ground in and of

itself for abandoning mutuality, but it is clear

that more than crowded dockets is involved. The

broader question is whether it is any longer

tenable to afford a litigant more than one full

7

Because this case does not involve the offensive use

of collateral estoppel, we express no opinion as to whether

Bernhard was correct in its abandonment of mutuality in

both the context of its offensive and defensive use.

12

and fair opportunity for judicial resolution of

the same issue. The question in these terms

includes as part of the calculus the effect on

judicial administration, but it also encompasses

the concern exemplified by Bentham’s reference to

the gaming table in his attack on the principle

of mutuality of estoppel.[8] In any lawsuit where

a defendant, because of the mutuality principle,

is forced to present a complete defense on the

merits to a claim which the plaintiff has fully

litigated and lost in a prior action, there is an

arguable misallocation of resources. To the

extent the defendant in the second suit may not

win by asserting, without contradiction, that the

plaintiff had fully and fairly, but

unsuccessfully, litigated the same claim in a

prior suit, the defendant’s time and money are

diverted from alternative uses—productive or

otherwise—to relitigation of a decided issue.

And, still assuming that the issue was resolved

correctly in the first suit, there is reason to

be concerned about the plaintiff’s allocation of

resources. Permitting repeated litigation of the

same issue as long as the supply of unrelated

defendants holds out reflects either the aura of

the gaming table or “a lack of discipline and of

disinterestedness on the part of the lower

courts, hardly a worthy and wise basis for

fashioning rules of procedure.” Although neither

judges, the parties, nor the adversary system

performs perfectly in all cases, the requirement

of determining whether the party against whom an

estoppel is asserted had a full and fair

opportunity to litigate is a most significant

safeguard. [Id. at 328-329 (citation omitted).]

In this state, the Court of Appeals has expressly

stated that defensive use of collateral estoppel does not

require mutuality. In Knoblauch v Kenyon, 163 Mich App

8

Philosopher Jeremy Bentham had attacked mutuality of

estoppel “as destitute of any semblance of reason, and as

‘a maxim which one would suppose to have found its way from

the gaming-table to the bench’ . . . .” Blonder-Tongue,

supra at 322-323 (citations omitted).

13

712; 415 NW2d 286 (1987), plaintiff was convicted of a sex-

related crime. In his direct appeal from the conviction,

plaintiff claimed that his attorney rendered ineffective

assistance of counsel, but the conviction was affirmed.

Plaintiff then sued the attorney for legal malpractice,

essentially asserting the same grounds as those alleged in

his criminal appeal. As an affirmative defense, the

attorney filed a motion for summary disposition asserting

that collateral estoppel barred the subsequent litigation.

The trial court agreed and granted the attorney’s motion,

and the Court of Appeals affirmed, holding that mutuality

of estoppel was not required where: (1) collateral estoppel

was being asserted defensively and (2) the plaintiff had an

opportunity to litigate the issue in a prior proceeding.

Knoblauch, supra at 725.9

Persuaded by the reasoning of Knoblauch and of the

countless other courts that have adopted a similar test,10

9

This rule has been followed in subsequent decisions

of the Court of Appeals. See Alterman v Provizer, 195 Mich

App 422, 424-425; 491 NW2d 868 (1992); Schlumm v Terrance J

O’Hagan, PC, 173 Mich App 345, 357; 433 NW2d 839 (1988).

10

See, e.g., Adriaanse v United States, 184 F2d 968

(CA 2, 1950); Bruszewski v United States, 181 F2d 419 (CA

3, 1950); Graves v Associated Transport, Inc, 344 F2d 894

(CA 4, 1965); Davis v McKinnon & Mooney, 266 F2d 870 (CA 6,

1959); Federal S&L Ins Corp v Hogan, 476 F2d 1182 (CA 7,

1973); Fisher v Jones, 311 Ark 450; 844 SW2d 954 (1993);

Murphy v Northern Colo Grain Co, 30 Colo App 21; 488 P2d

103 (1971); Aetna Cas & Surety Co v Jones, 220 Conn 285;

596 A2d 414 (1991); Coca-Cola Co v Pepsi Cola Co, 172 A 260

14

we believe that the lack of mutuality of estoppel should

not preclude the use of collateral estoppel when it is

asserted defensively to prevent a party from relitigating

an issue that such party has already had a full and fair

opportunity to litigate in a prior suit. Such a belief is

supported by the Restatement of Judgments. “A party

precluded from relitigating an issue with an opposing party

. . . is also precluded from doing so with another person

unless . . . he lacked full and fair opportunity to

litigate the issue in the first action . . . .” 1

Restatement Judgments, 2d, ch 3, § 29, p 291. “A party who

has had a full and fair opportunity to litigate an issue

has been accorded the elements of due process. There is no

good reason for refusing to treat the issue as settled so

(Del Super, 1934); Ellis v Crockett, 51 Hawaii 86; 451 P2d

814 (1969); Anderson v Pocatello, 112 Idaho 176; 731 P2d

171 (1986); White v Allstate Ins Co, 605 NE2d 141 (Ind,

1992); Pat Perusse Realty Co v Lingo, 249 Md 33; 238 A2d

100 (1968); Home Owners Fed S&L Ass’n v Northwestern Fire &

Marine Ins Co, 354 Mass 448; 238 NE2d 55 (1968); Gammel v

Ernst & Ernst, 72 NW2d 364 (Minn, 1955); Thomas M McInnis &

Associates, Inc v Hall, 318 NC 421; 349 SE2d 552 (1986);

Sanderson v Balfour, 109 NH 213; 247 A2d 185 (1969); Silva

v State, 106 NM 472; 745 P2d 380 (1987); Ettin v Ava Truck

Leasing, Inc, 53 NJ 463; 251 A2d 278 (1969); Posternack v

American Cas Co, 421 Pa 21; 218 A2d 350 (1966); Black Hills

Jewelry Mfg Co v Felco Jewel Industries Inc, 336 NW2d 153

(SD, 1983); Crowall v Heritage Mut Ins Co, 118 Wis 2d 120;

346 NW2d 327 (1984). See also anno: Mutuality of estoppel

as prerequisite of availability of doctrine of collateral

estoppel to a stranger to the judgment, 31 ALR3d 1044, § 4,

pp 1072-1073; 47 Am Jur 2d, Judgments, § 648, pp 54-55; 18

Moore’s Fed Practice (3d ed), Issue preclusion and

collateral estoppel, § 132.04[2][b]-[c][ii], pp 156-162.

15

far as he is concerned other than that of making the burden

of litigation risk and expense symmetrical between him and

his adversaries.” Judgments, p 292, comment b. In

circumstances where mutuality is required and where

collateral estoppel is asserted defensively, the mutuality

requirement only encourages gamesmanship by a plaintiff.11

See n 8. A party is entitled to his day in court on a

particular issue, and is not entitled to his day in court

against a particular adversary. 31 ALR3d 1044, § 4, p

1068.

The doctrine of collateral estoppel is intended “‘to

relieve parties of the cost and vexation of multiple

lawsuits, conserve judicial resources, and, by preventing

inconsistent decisions, encourage reliance on adjudication

. . . .’” Detroit v Qualls, 434 Mich 340, 357 n 30; 454

11

Because nonparties, such as defendant, receive no

notice of third-party actions and thus are generally

unaware of such actions, we are perplexed as to how

“abandoning the mutuality requirement under these

circumstances would . . . reward defendant’s gamesmanship.”

Post at 9 (emphasis added). If plaintiff believed, as the

dissent contends, that defendant, by not requesting to be

joined in the third-party action, was employing

“gamesmanship,” plaintiff had the authority to attempt to

join defendant. MCR 2.206(A)(1). However, because “there

are rarely tactical reasons for refraining from joining all

potential defendants,” we believe that it was plaintiff

who, by choosing not to attempt to join defendant as a

party was employing “gamesmanship” and was planning to use

the instant action, if necessary, “merely [as] a renewal of

[his] previously unsuccessful effort.” 1 Restatement

Judgment, 2d, ch 3, § 29, p 301 reporter’s note. See also

Ritchie v Landau, 475 F2d 151, 156 n 5 (CA 2, 1973).

16

NW2d 374 (1990), quoting Allen v McCurry, 449 US 90; 101 S

Ct 411; 66 L Ed 2d 308 (1980). By refusing to adopt the

majority’s test, the dissent does nothing to preserve the

underpinnings of collateral estoppel. The dissent would

require defendants to relitigate previously adjudicated

issues;12 it would require the judicial system to employ

scarce resources repeatedly adjudicating the same issue; it

would increase the likelihood of inconsistent decisions

being rendered by the judicial process; it would promote

opportunities for parties to use the judicial process in a

vexatious manner; and it would require defendants to expend

resources relitigating issues. Each of these effects would

only weaken our judicial process.13

Further, the dissent, at least in part, apparently

bases its position on the notion that fairness, in the

context of defensive collateral estoppel, is determined

12

Given that there are over sixty years of experience

regarding the defensive use of collateral estoppel in the

absence of mutuality, see Bernhard, supra, the dissent’s

fear that the “full and fair” standard will “open the

Pandora’s box,” causing judicial resources to be spent

litigating whether a prior adjudication was “full and

fair,” appears unfounded. Post at 7 (citation omitted).

13

The test that we set forth today is fully consistent

with our understanding of collateral estoppel as

“strik[ing] a balance between the need to eliminate

repetitious litigation and the interest in affording

litigants a full and fair adjudication of the issues

involved in their particular claims.” Post at 1. Such

test serves both these interests without diluting either.

17

only on the basis of symmetry. Post at 9-10.14 However, as

explained in Bruszewski v United States, 181 F2d 419 (CA 3,

1950), the achievement of "substantial justice," rather

than symmetry, is the proper measure of fairness in the

context of defensive collateral estoppel:

This second effort to prove negligence is

comprehended by the generally accepted precept

that a party who has had one fair and full

opportunity to prove a claim and has failed in

that effort, should not be permitted to go to

trial on the merits of that claim a second time.

Both orderliness and reasonable time saving

judicial administration require that this be so

unless some overriding consideration of fairness

to a litigant dictates a different result in the

circumstances of a particular case.

The countervailing consideration urged here

is lack of mutuality of estoppel. In the present

suit [the plaintiff] would not have been

permitted to take advantage of an earlier

affirmative finding of negligence, had such

finding been made in [his first suit against a

different defendant]. For that reason he urges

that he should not be bound by a contrary finding

in that case. But a finding of negligence in

[the plaintiff’s first suit] would not have been

binding against the [defendant in a second suit]

because [that defendant] had no opportunity to

contest the issue there. The finding of no

negligence on the other hand was made after full

opportunity to [the plaintiff] on his own

election to prove the very matter which he now

14

“[W]e should firmly keep in mind that we are

considering the situation where the [plaintiff] was

plaintiff in the prior suit and chose to litigate at that

time and place. Presumably, he was prepared to litigate

and to litigate to the finish against the defendant

[involved in the prior suit]. [Accordingly,] there is no

reason to suppose that [the plaintiff] would face either

surprise or unusual difficulties in getting all relevant

and probative evidence before the court in the first

litigation.” Blonder-Tongue, supra at 332.

18

urges a second time. Thus, no unfairness results

here from estoppel which is not mutual. In

reality the argument of [the plaintiff] is merely

that the application of res judicata in this case

makes the law asymmetrical. But the achievement

of substantial justice rather than symmetry is

the measure of the fairness of the rules of res

judicata. [Id. at 421.]

IV. CONCLUSION

In an effort to promote the efficient administration

of justice and to ensure more consistent judicial

decisions, we hold that, where collateral estoppel is being

asserted defensively against a party who has already had a

full and fair opportunity to litigate the issue, mutuality

is not required. Further, because both requirements of

this test have been satisfied here, we reverse the judgment

of both the trial court and the Court of Appeals, remand

this case to the trial court, and order it to grant

defendant’s motion for summary disposition.15

Maura D. Corrigan

Elizabeth A. Weaver

Clifford W. Taylor

Robert P. Young, Jr.

Stephen J. Markman

15

We believe that the instant decision should be given

full retroactive effect because, contrary to the dissent’s

assertion, this decision does not “represent[] a sweeping

change in the law.” Post at 10. Rather, there is no

previous decision of this Court that has decided whether

mutuality should apply in the defensive context. See ns 5-

6.

19

S T A T E O F M I C H I G A N

SUPREME COURT

FRANK MONAT,

Plaintiff-Appellee,

v No. 121122

STATE FARM INSURANCE COMPANY,

Defendant-Appellant.

_______________________________

CAVANAGH, J. (dissenting).

In this first-party, no-fault action, defendant seeks

to invoke the doctrine of collateral estoppel to preclude

plaintiff from relitigating an issue decided in plaintiff’s

third-party negligence action. We are again called upon to

examine the mutuality requirement of the doctrine of

collateral estoppel as it has been traditionally applied in

Michigan. Because the majority imprudently departs from

this tradition, I must respectfully dissent.

The doctrine of collateral estoppel, also known as

issue preclusion, strikes a balance between the need to

eliminate repetitious litigation and the interest in

affording litigants a full and fair adjudication of the

issues involved in their particular claims. Storey v

Meijer, Inc, 431 Mich 368, 372-373; 429 NW2d 169 (1988).

As a preclusion doctrine, collateral estoppel serves “an

important function in resolving disputes by imposing a

state of finality to litigation where the same parties have

previously had a full and fair opportunity to adjudicate

their claims.” Nummer v Dep’t of Treasury, 448 Mich 534,

541; 533 NW2d 250 (1995) (emphasis added). Collateral

estoppel applies when a question of fact essential to the

judgment was actually litigated and determined by a valid

and final judgment. Senior Accountants, Analysts &

Appraisers Ass’n v Detroit, 399 Mich 449, 458; 249 NW2d 121

(1976); Howell v Vito’s Trucking & Excavating Co, 386 Mich

37, 41-42; 191 NW2d 313 (1971). In addition, Michigan law

requires mutuality of estoppel. Storey, supra at 373 n 3;

Howell, supra at 41-42; Lichon v American Universal Ins Co,

435 Mich 408, 427; 459 NW2d 288 (1990).

“[M]utuality of estoppel requires that in order for a

party to estop an adversary from relitigating an issue that

party must have also been a party, or privy to a party, in

the previous action.” Lichon, supra at 427. Stated

differently, “estoppel is mutual if the one taking

advantage of the earlier adjudication would have been bound

by it, had it gone against him.” Howell, supra at 43

(citations omitted). Unless both parties in a subsequent

action are bound by a prior judgment, neither party may use

that prior judgment as determinative of an issue in the

subsequent action.

2

Until today’s decision, mutuality of estoppel

unquestionably remained the law in Michigan. Because

defendant was not a party in the third-party action,

mutuality is absent and collateral estoppel could not be

invoked. Further, defendant acknowledged that had the

issue of plaintiff’s injury been decided unfavorably to

defendant’s position, it would not have been bound by the

earlier judgment. Nonetheless, defendant asked this Court

to either abrogate the mutuality requirement or create a

new exception so that it may now use the prior judgment for

its own advantage. The majority eagerly granted

defendant’s request and joined the so-called “modern

trend.”

For many years, mutuality of estoppel was the

recognized rule, but the rule began to come under fire by

courts in other jurisdictions. See, e.g., Bernhard v Bank

of America Nat’l Trust & Savings Ass’n, 19 Cal 2d 807; 122

P2d 892 (1942). The modern trend has been to abandon the

mutuality requirement in whole or in part. Some

jurisdictions have rejected mutuality depending on whether

collateral estoppel is asserted offensively or defensively.

Other jurisdictions, however, have continued to adhere to

3

the mutuality requirement despite the modern trend.1

Defendant’s arguments in support of yielding to the

modern trend, such as preserving judicial resources, are by

no means novel and have previously been rejected by this

Court. In fact, this Court has consistently and explicitly

declined the invitation to follow the modern trend. In

1971, this Court made a conscious decision to resist the

modern trend and refused to abrogate the mutuality

requirement. Howell, supra at 43. This Court stated:

A more fundamental reason for declining

plaintiff's invitation to abandon the requirement

of mutuality is that we are not convinced that to

do so would promote the ends of justice or

increase efficiency in the administration of our

courts. Surely, we must strike a balance between

the competing interests: (a) that the litigant

against whom the doctrine is asserted has had his

day in court; vis-à-vis [sic] (b) that

repetitious and needless litigation which burden

our already overloaded court dockets must be

1

See, e.g., Leon C Baker, PC v Merrill Lynch, Pierce,

Fenner & Smith, Inc, 821 So 2d 158, 165 (Ala, 2001),

quoting McMillian v Johnson, 878 F Supp 1473, 1520 (MD Ala,

1995)(“’It is noteworthy that Alabama has not followed the

trend of abolishing the requirement that parties be

identical, sometimes referred to as the mutuality of

estoppel requirement.’”); EC v Katz, 731 So 2d 1268, 1270

(Fla, 1999)(“This case falls squarely within our

traditional requirement that there be mutuality of parties

in order for collateral estoppel to apply defensively.”);

Hofsommer v Hofsommer Excavating, Inc, 488 NW2d 380, 384

(ND, 1992)(“Although the principle of mutuality has been

abandoned in numerous jurisdictions . . . , this court has

applied the mutuality rule as a prerequisite to the

application of collateral estoppel.”); Rawlings v Lopez,

267 Va 4; 591 SE2d 691 (2004)(reaffirming Virginia’s

adherence to the principle of mutuality in the context of

defensive collateral estoppel).

2

avoided. But we need not sacrifice a well-

established and valuable rule to achieve this

balance.

* * *

In point of fact, the abandonment of the

mutuality doctrine would in many instances create

more pitfalls to orderly and efficient

administration of justice. [Id. at 48-49.]

Howell involved a case of offensive collateral

estoppel, but it is evident that the Court was basing its

commitment to the mutuality requirement on larger policy

concerns. “The course of justice is best served by

adherence to a long established and definitive rule which

our bench and bar well recognizes rather than permit an ad

hoc formulation of a rule based upon innumerable and

unmanageable factors.” Id. at 51. As recently as 1990,

this Court expressly reaffirmed its commitment to mutuality

of estoppel in a case involving defensive collateral

estoppel. Lichon, supra at 427-428.

Again, the arguments in support of abrogation have

been duly considered by earlier compositions of this Court.

Despite these earlier decisions, the Court’s current

majority now finds these rehashed arguments persuasive,

finding error where none had been discovered before. The

doctrine of stare decisis is more than a fad and decades of

precedent cannot be readily discounted as the majority

suggests. “This Court has stated on many occasions that

‘[u]nder the doctrine of stare decisis, principles of law

3

deliberately examined and decided by a court of competent

jurisdiction should not be lightly departed.’” Brown v

Manistee Co Rd Comm, 452 Mich 354, 365; 550 NW2d 215

(1996), quoting Boyd v W G Wade Shows, 443 Mich 515, 525 n

15; 505 NW2d 544 (1993) (citations omitted). Moreover,

this Court should “’not overrule a decision deliberately

made unless [it] is convinced not merely that the case was

wrongly decided, but also that less injury would result

from overruling than from following it.’” Brown, supra at

365, quoting Boyd, supra at 524. I perceive no error,

flagrant or otherwise, committed by this Court in our

earlier decisions that specifically declined to follow the

modern trend. Like the learned members who previously sat

on this Court, I find defendant’s rehashed arguments

equally unpersuasive.

Nor am I persuaded that this Court should create a new

exception to the mutuality requirement. This Court has

noted several “well-established” exceptions to the

mutuality requirement. Lichon, supra at 428 n 16.

However, the relationship between plaintiff and defendant

does not fit into one of these recognized exceptions. For

example, an exception to the mutuality requirement has been

recognized where the liability of one party is dependent on

the culpability of the other party. DePolo v Greig, 338

Mich 703, 711; 62 NW2d 441 (1954). The relationship

4

between plaintiff and defendant as insured and insurer is

simply not the type of special relationship that has

traditionally formed the basis of the “well-established”

exceptions.2

With the adoption of the majority’s new formulation,

the fears that this Court expressed in Howell are beginning

to ring true. This Court stated:

To abandon mutuality and proceed on a “full

and fair hearing” standard would open the

Pandora’s box of problems rhetorically posed by

Professor Semmel [Collateral estoppel, mutuality

and joinder of parties, 68 Col LR 1457, 1469

(1968)]:

“The real problem is what standard the court

in the second action should apply if it

undertakes to determine whether the first action

was litigated ‘with full vigor and opportunity to

be heard.’ Does a defendant in a small property

damage claim meet the test? If he knows or has

reason to fear that an adverse decision will be

utilized by nonparties to the first action, he

may very well proceed with greater vigor, but

there is no assurance of this since insurance

companies currently seek to dispose of property

damage claims with the minimum of litigation

expense. As the dissent in B. R. DeWitt Inc v

Hall [19 NY2d 141, 148-149; 225 NE2d 195; 278 NYS

2d 596 (1967)] noted, how do we treat cases where

the defendant has different liability insurers

for personal injury claims and property damage

claims? How can a judge evaluate the vigor of

2

I acknowledge that the Court of Appeals has taken

upon itself to create new exceptions to the mutuality

requirement. See, e.g., Alterman v Provizer, Eisenberg,

Lichtenstein & Pearlman, PC, 195 Mich App 422; 491 NW2d 868

(1992). However, as mentioned above, I am not convinced

that this Court should create a new exception under these

circumstances, nor do I express an opinion relating to any

exceptions created by lower courts.

5

litigation in a case in which he did not sit?

How can he weigh the difficulty a defendant faced

by being forced to litigate in one jurisdiction

rather than another? How did the burden of proof

or applicable presumption affect the result?”

[Howell, supra at 51-52 n 13.]

The majority insists that the numerous factors set forth by

the Restatement will assist in determining whether an issue

is fully and fairly litigated. The majority further notes

that “we do not believe that the factors set forth in the

Restatement are ‘innumerable or unmanageable . . . .’”

Ante at 9 n 4. Thus, under the majority’s rationale, the

fears detailed by the Howell Court are necessarily

unfounded.

In its next breath, however, the majority then

concludes that plaintiff’s no-appeal agreement is not a

situation covered by the illuminating factors set forth by

the Restatement and, therefore, the majority has to resort

to a waiver analysis to reach its ultimate conclusion that

plaintiff fully and fairly litigated the injury issue in

the third-party action. The majority acknowledges that the

full and fair opportunity analysis is not an easy endeavor

and courts should “proceed cautiously.” Ante at 7 n 3. As

a practical matter, however, considerable judicial

resources will be spent litigating the full and fair

opportunity prong. Thus, the facts of this case illustrate

the idea that judicial economies will not be achieved under

6

the majority’s new approach, an idea previously

acknowledged by the Howell Court.

Further, abandoning the mutuality requirement under

these circumstances would undermine the purpose of the rule

and reward defendant’s gamesmanship.3 Rather than

continuing to pay benefits under the policy and intervene

in the third-party action, defendant elected to stop making

payments, thereby compelling plaintiff to expend judicial

resources by bringing a first-party action. Defendant

consciously made this decision because it knew that if

plaintiff were found to be injured in the third-party

action, it would not be bound by that judgment and could

relitigate the injury issue. Alternatively, if plaintiff

was not found to be injured, defendant could then assert

the defense of collateral estoppel, cast plaintiff in a

negative light, and play the odds that this Court would

step in line and abrogate the mutuality requirement. The

majority willingly conformed and even rewarded such

maneuvering by inexplicably giving defendant the benefit of

the new rule of law.

3

The majority asserts that first-party, no-fault

insurers, as nonparties, are generally unaware of third-

party actions involving their insureds. Yet, I find it

telling that this defendant stopped paying benefits a short

time after plaintiff filed the third-party action rather

than simply denying plaintiff’s claim in the first place.

7

In general, “’judicial decisions are to be given

complete retroactive effect.’” Michigan Educational

Employees Mut Ins Co v Morris, 460 Mich 180, 189; 596 NW2d

142 (1999) (citations omitted). This Court, however, has

considered prospective or limited retroactive application

where well-established law has been changed. Id. In

resolving the “retroactive-prospective dilemma,” this Court

weighs “’(1) the purpose to be served by the new rule, (2)

the extent of reliance on the old rule, and (3) the effect

of retroactivity on the administration of justice.’” Id.

at 190 (citations omitted). The majority opinion

represents a sweeping change in the law. Until today’s

decision, mutuality remained the law in Michigan. In light

of the bench and bar’s heavy reliance on the mutuality

requirement, mutuality’s storied history, and the notion

that the new rule is unlikely to achieve its stated

purpose, I am unclear with regard to how the majority can

justify applying the rule of law announced in today’s

decision to this particular defendant.

In sum, I am unwilling to abrogate the mutuality

requirement in the application of collateral estoppel. I

remain unconvinced that the judicial economies the majority

claims are achieved by abrogation are sufficient to

override concerns about the fairness afforded to litigants.

The mutuality requirement already strikes an evenhanded

8

balance between these competing interests. Accordingly, I

respectfully dissent.

Michael F. Cavanagh

Marilyn Kelly

9