Petition for Writ of Certiorari — Opta Corporation, et al., Petitioners v. Daewoo Electronics America, Inc..

NO.

In the Supreme Court of the United States

OPTA CORPORATION &

TCL MULTIMEDIA TECHNOLOGY HOLDING LIMITED,

Petitioners,

v.

DAEWOO ELECTRONICS AMERICA INC.,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

LAURENCE M. SANDELL

Counsel of Record

LEI MEI

MEI & MARK LLP

818 18th St. NW, Ste. 410

Washington, DC 20006

202-567-6417 x717

lsandell@meimark.com

Counsel for Petitioners

Becker Gallagher · Cincinnati, OH · Washington, D.C. · 800.890.5001

i

QUESTION PRESENTED

Semtek International Inc. v. Lockheed Martin Corp.

held that the “claim-preclusive effect of a dismissal by

a federal court sitting in diversity” is “the law that

would be applied by state courts in the State in which

the federal diversity court sits”—except when “the state

law is incompatible with federal interests.” 531 U.S.

497, 508-509 (2001). Influenced by values of federalism,

including uniformity, Semtek adopted a federal

common law rule akin to the Full Faith and Credit Act,

which “directs all courts to treat a state court judgment

with the same respect that it would receive in the

courts of the rendering state.” Matsushita Elec. Indus.

Co. v. Epstein, 516 U.S. 367, 373 (1996). Full Faith and

Credit permits a state “to determine the

extraterritorial effect of its judgment [only] indirectly

by prescribing the effect of its judgments within the

State.” Thomas v. Washington Gas Light Co., 448 U.S.

261, 270 (1980).

Here, the Ninth Circuit found New Jersey’s “entire

controversy doctrine” to entail a different preclusive

effect depending on the character of the applying court.

A split appellate panel refused to apply the same

preclusion rule that a New Jersey state court would,

but instead applied “the New Jersey state court’s law

as the Ninth Circuit.” App. 24. The question presented

is:

Whether the judgment of a federal diversity court is

presumptively treated with “the same respect that it

would receive in the [state] courts” of the district where

it is located.

ii

PARTIES TO THE PROCEEDING

Petitioners, and Defendant-Appellees below, are

Opta Corporation (“Opta”) and TCL Multimedia

Technology Holding Limited (“TCLM”). All claims

against Defendant-Appellees T.C.L. Industries

Holdings (H.K.) Limited (“TCLI”) and TCL Corporation

(“TCLC”) were dismissed by the district court. On

appeal, these dismissals were uncontested and

affirmed. Appendix to the Petition (“App.”) 5 n.1.

The Respondent is Daewoo Electronics America Inc.

(“Daewoo”).

RULE 29.6 DISCLOSURE STATEMENT

Lotus International Holdings Ltd. and TCLI each

own over 10% of the stock of Petitioner Opta. TCLI

owns 10% of the stock of Petitioner TCLM. TCLI is a

wholly-owned subsidiary of TCLC.

iii

TABLE OF CONTENTS

QUESTION PRESENTED . . . . . . . . . . . . . . . . . . . . i

PARTIES TO THE PROCEEDING . . . . . . . . . . . . . ii

RULE 29.6 DISCLOSURE STATEMENT . . . . . . . . ii

TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . vi

PETITION FOR A WRIT OF CERTIORARI . . . . . . 1

OPINIONS BELOW . . . . . . . . . . . . . . . . . . . . . . . . . 1

JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

CONSTITUTIONAL & STATUTORY

PROVISIONS INVOLVED . . . . . . . . . . . . . . . . . 1

STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . 2

A. Legal Background . . . . . . . . . . . . . . . . . . . 3

1. Claim Preclusive Effects in Federal

Court . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2. New Jersey’s Claim Preclusion Law . . 5

B. Factual and Procedural Background . . . . 6

C. The Split Decision Below . . . . . . . . . . . . . 8

REASONS FOR GRANTING THE WRIT . . . . . . . 11

I.

The Ninth Circuit’s Majority Decision

Directly Conflicts with this Court’s

Unanimous Semtek Decision . . . . . . . . . . . . 11

iv

II.

The Question Presented Is Fundamental to

the Uniform Functioning of the Federal

Judiciary, Consistent with the Principles of

Federalism and Full Faith and Credit . . . . 14

III.

Circuit Court Opinions Evince Conflict and

Confusion on the Preclusive Effect of

Diversity Judgments . . . . . . . . . . . . . . . . . . 17

A. The First, Third, and Fourth Circuits

Have Recognized the Question Presented

and Relied Upon Alternative Grounds to

Avoid Addressing It . . . . . . . . . . . . . . . . . 17

B. The Fifth, Sixth, and Eleventh Circuits

Apply Federal Preclusion Principles to

Diversity Judgments . . . . . . . . . . . . . . . . 21

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

APPENDIX

Appendix A Opinion and Dissenting Opinion in the

United States Court of Appeals for the

Ninth Circuit

(November 27, 2017) . . . . . . . . . . App. 1

Appendix B Judgment in the United States

District Court, Northern District of

California

(December 19, 2014) . . . . . . . . . App. 40

Appendix C Order Re: Dkt. No. 80 in the United

States District Court, Northern

District of California

(August 28, 2014) . . . . . . . . . . . . App. 41

v

Appendix D Order Granting in Part and Denying

in Part Defendant’s Motion to Dismiss

in the United States District Court,

Northern District of California

(July 25, 2013) . . . . . . . . . . . . . . App. 48

Appendix E Order Denying Petition for Rehearing

En Banc in the United States Court of

Appeals for the Ninth Circuit

(January 8, 2018) . . . . . . . . . . . . App. 66

vi

TABLE OF AUTHORITIES

CASES

Allied Erecting Dismantling Co. v. Genesis Equip. &

Mfg., Inc.,

805 F.3d 701 (6th Cir. 2015) . . . . . . . . . . . . . . . 21

Archbrook Laguna, LLC v. Marsh,

997 A.2d 1035 (N.J. Super. Ct. App. Div. 2010) . 8

Chavez v. Dole Food Co.,

836 F.3d 205 (3d Cir. 2016) . . . . . . . . . . 12, 13, 19

Chrystal v. NJ Dept. of Law and Public Safety,

535 App’x 120 (3d Cir. 2013) . . . . . . . . . . . . . . . 15

Cogdell v. Hosp. Ctr. at Orange,

560 A.2d 1169 (N.J. 1989) . . . . . . . . . . . . . . . . . . 6

CSX Transp., Inc. v. Bhd. of Maint. of Way Emps.,

327 F.3d 1309 (11th Cir. 2003) . . . . . . . . . . . . . 22

Exxon Mobil Corp. v. Saudi Basic Indus. Corp.,

544 U.S. 280 (2005) . . . . . . . . . . . . . . . . . . . . . . . 3

Gonzalez v. Crosby,

545 U.S. 524 (2005) . . . . . . . . . . . . . . . . . . . . 5, 13

Gorelik v. Gorelik,

35 Misc.3d 1213 (N.Y. Sup. Ct. 2012) . . . . . . . . 15

Hatch v. Trail King Industries, Inc.,

699 F.3d 38 (1st Cir. 2012) . . . . . . . . . . . . . . . . 20

Havens v. Mabus,

759 F.3d 91 (D.C. Cir. 2014) . . . . . . . . . . . . . . . 13

Herman v. Meiselman,

541 F.3d 59 (1st Cir. 2008) . . . . . . . . . . . . . . . . 20

vii

Hoffman v. Nordic Naturals, Inc.,

No. 14-3291, 2015 U.S. Dist. LEXIS 4439

(D.N.J. 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Hoffman v. Nordic Naturals, Inc.,

837 F.3d 272 (3d Cir. 2016) . . . . . . . . . . 17, 18, 19

Joseph v. Athanasopoulos,

648 F.3d 58 (2d Cir. 2011) . . . . . . . . . . . . . . . . . 13

J.Z.G. Res., Inc. v. Shelby Ins. Co.,

84 F.3d 211 (6th Cir. 1996) . . . . . . . . . . . . . . . . 21

Kent Motor Cars, Inc. v. Reynolds & Reynolds, Co.,

25 A.3d 1027 (N.J. 2011) . . . . . . . . . . . . . . . . . . . 6

Kremer v. Chem. Constr. Co.,

456 U.S. 461 (1982) . . . . . . . . . . . . . . . . . . . . 3, 14

Leonard v. RDLG, LLC,

644 Fed. App’x 612 (6th Cir. 2016) . . . . . . . . . . 21

Matsushita Elec. Indus. Co. v. Epstein,

516 U.S. 367 (1996) . . . . . . . . . . . . . . . . . . . . . . . i

McHale v. Kelly,

527 Fed. App’x 149 (3d Cir. 2013) . . . . . . . . . . . 19

Mortgagelinq Corp. v. Commonwealth Land Title

Ins.,

662 A.2d 536 (1995) . . . . . . . . . . . . . . . . . . . . . . . 8

Palmer & Kay, Inc. v. Marsh & Mclennan Cos.,

404 F.3d 1297 (11th Cir. 2005) . . . . . . . . . . . . . 22

Paramount Aviation Corp. v. Augusta,

178 F.3d 132 (3d Cir. 1999) . . . . . . . . . 6, 8, 18, 19

viii

Parsons Steel, Inc. v. First Alabama Bank,

474 U.S. 518 (1986) . . . . . . . . . . . . . . . . . . . . 3, 15

Perini v. Leo,

147 A.D.3d 877 (N.Y. App. Div. 2017) . . . . . . . . 15

Q Intern Courier v. Smoak,

441 F.3d 214 (4th Cir. 2006) . . . . . . . . . . . . . . . 20

Rabo Agrifinance, Inc. v. Terra Xxi, Ltd.,

583 F.3d 348 (5th Cir. 2009) . . . . . . . . . . . . . . . 21

Rawe v. Liberty Mut. Fire Ins. Co.,

462 F.3d 521 (6th Cir. 2006) . . . . . . . . . . . . . . . 21

Reid v. Transp. Ins. Co.,

502 Fed. App’x 157 (3d Cir. 2012) . . . . . . . . . . . 15

Reimer v. Smith,

663 F.2d 1316 (5th Cir.1981) . . . . . . . . . . . . . . . 21

Rong Chen v. Yeung,

33 Misc. 3d (N.Y. Sup. Ct. 2011) . . . . . . . . . . . . 15

Samuelson v. McMurtry,

962 S.W.2d 473 (Tenn. 1998) . . . . . . . . . . . . . . . 15

Semtek International Inc. v. Lockheed Martin Corp.,

531 U.S. 497 (2001) . . . . . . . . . . . . . . . . . . passim

Smith v. Red Top Taxicab Corp.,

168 A. 796 (E. & A. 1933) . . . . . . . . . . . . . . . . . . 6

Smith v. Woosley,

399 F.3d 428 (2d Cir. 2005) . . . . . . . . . . . . . . . . 13

Studio 45 Discotheque, Inc. v. City of Union City,

292 Fed. App’x 197 (3d Cir. 2008) . . . . . . . . . . . 15

ix

Tampa Bay Water v. HDR Eng’g, Inc.,

731 F.3d 1171 (11th Cir. 2013) . . . . . . . . . . . . . 22

Taylor v. Sturgell,

553 U.S. 880 (2008) . . . . . . . . . . . . . . . . . . . . . . . 4

Thomas v. Washington Gas Light Co.,

448 U.S. 261 (1980) . . . . . . . . . . . . . . . . . . passim

Wadeer v. New Jersey Mfrs. Ins. Co.,

110 A.3d 19 (N.J. 2015) . . . . . . . . . . . . . . . . . . 5, 6

Wiggins v. String,

No. 12-3176, 2013 U.S. Dist. LEXIS 40955

(D.N.J. Mar. 25, 2013) . . . . . . . . . . . . . . . . . . . . 18

Zahl v. Warhafig,

655 Fed. App’x 66 (3d Cir. 2016) . . . . . . . . . . . . 15

CONSTITUTION

N.J. CONST. Art. VI, § III.4 . . . . . . . . . . . . . . . . . . . . 6

U.S. CONST. art. IV, § 1 . . . . . . . . . . . . . . . . . . . . 1, 14

STATUTES AND RULES

28 U.S.C. § 1254(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 1

28 U.S.C. § 1738 . . . . . . . . . . . . . . . . . . . . . . . passim

N.J. Rule of Court 4:30A . . . . . . . . . . . . . . . . . . . . . . 6

OTHER AUTHORITIES

Stephen B. Burbank, Semtek, Forum Shopping, and

Federal Common Law, 77 Notre Dame L. Rev.

1027 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

1

PETITION FOR A WRIT OF CERTIORARI

Petitioners respectfully request a writ of certiorari

to review the judgment of the United States Court of

Appeals for the Ninth Circuit.

OPINIONS BELOW

The opinion of the U.S. Court of Appeals for the

Ninth Circuit is reported at 875 F.3d 1241 and

reprinted at App. 1–39. The August 28, 2014, opinion

of the U.S. District Court for the Northern District of

California, dismissing the claims (in relevant part) is

unpublished but reported at 2014 U.S. Dist. LEXIS

121286 and is reprinted at App. 41–47; see also

App. 40. A superseded July 25, 2013, opinion from the

same district court (which applied federal claim

preclusion principles) is unpublished but reported at

2013 U.S. Dist. LEXIS 104603 and is reprinted at

App. 48-65.

JURISDICTION

The Ninth Circuit issued its decision on November

27, 2017. App. 1. It denied rehearing en banc on

January 8, 2018. App. 66-67. This Court has

jurisdiction under 28 U.S.C. § 1254(1).

CONSTITUTIONAL &

STATUTORY PROVISIONS INVOLVED

Article IV, Section 1 of the United States

Constitution provides:

Full Faith and Credit shall be given in each

State to the public Acts, Records, and judicial

Proceedings of every other State. And the

Congress may by general Laws prescribe the

2

Manner in which such Acts, Records and

Proceedings shall be proved, and the Effect

thereof.

28 U.S.C. § 1738 (June 25, 1948, ch. 646, 62 Stat.

947) provides, in relevant part:

The records and judicial proceedings of any court

of any such State, Territory or Possession …

shall have the same full faith and credit in every

court within the United States and its

Territories and Possessions as they have by law

or usage in the courts of such State, Territory or

Possession from which they are taken.

STATEMENT OF THE CASE

In Semtek, this Court, with attention to the values

of uniformity, equitable administration of the laws, and

discouragement of forum shopping, unanimously ruled

that the preclusive effect of a diversity judgment shall

be governed by the law applied in the courts of the

state where the diversity court sits. Semtek, however,

did not plainly speak to whether a state could vary its

claim preclusion law based on whether the court that

applied it was a court of that state.

Below, a divided panel of the Ninth Circuit held

that Semtek required it to apply the two-faced claim

preclusion law of New Jersey—which provides one set

of rules when applied in New Jersey State courts, and

another set when applied in all other courts. It applied

such claim preclusion law notwithstanding that Full

Faith and Credit forbids a state from specifying

extraterritorial effects of its judgments that are

different from those applicable in its own courts.

3

Beyond the dispute in the Ninth Circuit panel

below, U.S. Courts of Appeal have demonstrated

confusion about Semtek’s federal common law rule:

some appeals courts (e.g., the First, Third, and Fourth

Circuits) have considered the question presented and

avoided it by ruling on other grounds; others (e.g., the

Fifth, Sixth, and Eleventh Circuits) have ignored state

preclusion law altogether in determining the preclusive

effect of diversity judgments.

The relevant facts are not in dispute. There can be

no doubt that resolution of the question presented

would resolve this case. See App. 29 (J. Bybee, in

dissent, noting the positions of the majority and

respondent).

A. Legal Background

1. Claim Preclusive Effects in Federal Court

“As one of its first acts, Congress directed that all of

United States courts afford the same full faith and

credit to state court judgments that would apply in the

State’s own courts.” Kremer v. Chem. Constr. Co., 456

U.S. 461, 463 (1982). This directive is embodied in the

Full Faith and Credit Act, 28 U.S.C. § 1738, which

“requires a federal court to ‘give the same preclusive

effect to a state-court judgment as another court of that

State would give.’” Exxon Mobil Corp. v. Saudi Basic

Indus. Corp., 544 U.S. 280, 293 (2005) (quoting Parsons

Steel, Inc. v. First Alabama Bank, 474 U.S. 518, 523

(1986)); see also Kremer, 456 U.S. at 467. Accordingly,

“a State is permitted to determine the extraterritorial

effect of its judgment; but it may only do so indirectly

by prescribing the effect of its judgments within the

4

State.” Thomas v. Washington Gas Light Co., 448 U.S.

261, 270 (1980).1

Although the question of what preclusive effect

federal courts must give to state court judgments has

long been answered by § 1738 (and its predecessor

statutes), no statute or constitutional provision dictates

the preclusive effect that courts must give to federal

diversity court judgments. Semtek, 531 U.S. at 507.

And until this Court issued its landmark Semtek

opinion in 2001, the question remained unsettled.

In Semtek, this Court unanimously “adopt[ed], as

the federally prescribed rule of decision, the law that

would be applied by state courts in the State in which

the federal diversity court sits,” effectively embracing

the solution of the Full Faith and Credit Act. 531 U.S.

at 508; accord Taylor v. Sturgell, 553 U.S. 880, 891 n.4

(2008). This federal common law determination of the

applicable claim preclusion law came with the caveat

that “federal reference to state law will not obtain, of

course, in situations in which the state law is

incompatible with federal interests.” 531 U.S. at 509.

Semtek also addressed the preclusive effect owed to

statute-of-limitations-based dismissals. The Court

indicated that judgments “that do not pass upon the

substantive merits of a claim … do not (in many

jurisdictions) entail claim-preclusive effect.” 531 U.S.

1

See also App. 31 n.2 (dissent indicating that although this holding

was in a plurality opinion, the entire Thomas Court appeared to

concur).

5

at 502 (emphasis in original).2 It acknowledged that a

statute-of-limitations-based dismissal might be given

a different effect in a different jurisdiction with a

longer statute of limitations. Id. at 504, 509.

Nevertheless, the Semtek Court did not—and had no

occasion to—opine on whether state preclusion laws

are permitted to specify different effects depending on

the character of the applying court is located.

2. New Jersey’s Claim Preclusion Law

New Jersey’s claim preclusion law comprises two

related, but discrete, doctrines: conventional res

judicata (similar to federal res judicata)3 and the entire

controversy doctrine. Wadeer v. New Jersey Mfrs. Ins.

Co., 110 A.3d 19, 27-28 (N.J. 2015); see also App. 27-29,

n.1. As recently articulated by the Supreme Court of

New Jersey, the entire controversy doctrine

embodies the principle that the adjudication of

a legal controversy should occur in one litigation

in only one court; accordingly, all parties

involved in a litigation should at the very least

present in that proceeding all of their claims and

defenses that are related to the underlying

controversy.

2

In the habeas corpus context, this Court has grouped “a denial for

such reasons as failure to exhaust [or] procedural default” with a

“statute-of-limitations bar” as “ruling[s] which preclude[] a merits

determination.” Gonzalez v. Crosby, 545 U.S. 524, 532 n.4 (2005).

3

Petitioners do not seek certiorari as to the portion of the

majority’s opinion pertaining to the application of conventional res

judicata principles. See generally App. 10-19.

6

Wadeer, 110 A.3d at 28 (internal citations and

quotations omitted).

Under the entire controversy doctrine, a “party

cannot withhold part of a controversy for separate later

litigation even when the withheld component is a

separate and independently cognizable cause of action.”

Paramount Aviation Corp. v. Augusta, 178 F.3d 132, 137

(3d Cir. 1999). Currently applicable through New

Jersey’s Rule of Court 4:30A,4 the doctrine is grounded

in New Jersey’s Constitution and over a century of state

court precedent. N.J. CONST. Art. VI, § III.4; Kent Motor

Cars, Inc. v. Reynolds & Reynolds, Co., 25 A.3d 1027,

1036 (N.J. 2011) (characterizing it as a “claim preclusion

rule”); Cogdell v. Hosp. Ctr. at Orange, 560 A.2d 1169,

1172-74 (N.J. 1989) (quoting Smith v. Red Top Taxicab

Corp., 168 A. 796 (E. & A. 1933) for the proposition that

“[n]o principle of law is more firmly established”).

B. Factual and Procedural Background

The case underlying this Petition was the latest in

a series of litigations over an alleged debt incurred in

routine business transactions in which GoVideo, a nowdefunct non-party linked to Petitioners, ordered

electronic equipment from Respondent Daewoo. App. 6,

27 (dissent). After securing a default judgment against

GoVideo in 2007, Daewoo sought to satisfy it though

Petitioners (and other Defendant-Appellants)5,

4

Rule 4:30A self-referentially relies upon the “entire controversy

doctrine.” Cf. pp. 19-20 (suggesting that the doctrine is merely

procedural because it is referred to in a court rule).

5

No claims against non-Petitioner Defendant-Appellants remain.

See App. 5, n. 1

7

purposely splitting its claims into successive federal

diversity cases.

In 2008, Daewoo filed a complaint in the U.S.

District Court for the District of New Jersey based on

diversity jurisdiction, seeking damages from Petitioner

Opta and Defendant-Appellee TCLI under an expired

guaranty contract. App. 6, 13, 27, 42, 49-50. Daewoo

undisputedly lost on summary judgment based on the

merits, namely the diversity court’s dispositive

interpretation the contract. Id.

Undeterred, Daewoo brought the instant litigation

against Petitioners6 in the U.S. District Court for the

Northern District of California in 2013, also based on

diversity jurisdiction. This time, Daewoo attempted to

recover the same debt from Defendant-Appellees under

different legal theories. App. 13, 18, 41, 43-45; see also

App. 27-28.

Consistent with Semtek, the California district court

applied New Jersey’s claim preclusion law in

dismissing Daewoo’s case.7 See App. 42, 44-45. It

dismissed these new legal theories (in relevant part)

because, in view of the claims in the New Jersey

diversity case, “they both arise from a single

controversy.” App. 43. In doing so, the California

district court emphasized that “Daewoo’s counsel

6

Accepting Daewoo’s allegations as true, all Defendant-Appellees

in the second diversity action were “the same or in privity with”

the parties in the first diversity action. See App. 42-43.

7

This dismissal superseded a prior decision by the same district

court that relied on federal preclusion law in declining to dismiss.

App. 48-65.

8

stated on the record that Daewoo could have brought

the claims at issue in this [California] case during the

New Jersey litigation, but chose not to do so because

Daewoo thought it was going to win on the theory it did

assert in the prior action….” App. 44.

Daewoo appealed to the Ninth Circuit, which

reversed in a split decision.

C. The Split Decision Below

As understood by the Ninth Circuit, New Jersey’s

entire controversy doctrine includes an exception—the

extraterritorial bar—that precludes its application

outside of New Jersey state courts.8 In view of this

extraterritorial bar, the majority declined to apply the

entire controversy doctrine. Instead, it applied New

Jersey’s conventional res judicata doctrine9 and

8

Of note, all relevant authority relied upon by the Ninth Circuit

majority or the extraterritorial bar pre-dated Semtek. App. 21-23

(citing Paramount, 178 F.3d at 142p Mortgagelinq Corp. v.

Commonwealth Land Title Ins., 662 A.2d 536, 537, 540-42 (1995));

accord. App. 34-35 n.3 (J. Bybee, dissenting); cf. App. 23 (citing

Archbrook Laguna, LLC v. Marsh, 997 A.2d 1035, 1042 (N.J.

Super. Ct. App. Div. 2010), where a New Jersey state court

declined to apply the entire controversy doctrine to the judgment

of a Georgia state court).

9

As an alternative ground of affirmance, the majority held that, to

the extent that application of the entire controversy doctrine—by

virtue of its extraterritoriality bar—is “incompatible with federal

interests,” federal preclusion law principles would govern. App. 24.

Because such treatment “would reach the same result,” it would

have the effect of permitting states to direct federal courts to apply

federal preclusion law de facto and have their own courts employ

a different preclusion rule. Id.

9

consequently found Daewoo’s

precluded. App. 4, 8-9, 18, 23-25.

new

claims

not

The majority stated that its application of the

extraterritorial bar “complies with the Supreme Court’s

decision in Semtek, which recognized that a state may

have preclusion rules that bar certain claims within

that state while permitting the same claims

elsewhere.” App. 25, 19. In support, the majority noted,

“Semtek foresaw and acknowledged situations where

state law statute of limitations would be preclusive in

one state, but not another,” before concluding—without

any explanation or authority—that the “entire

controversy doctrine is no different.” App. 24 (citing

531 U.S. at 503–04; emphasis added).

The dissent, however, found that the majority’s

application of the extraterritorial bar “flatly contradicts

Semtek”:

Under Semtek, we must, as F2,10 apply “the law

that would be applied by state courts in the

State in which [F1 sits].” 531 U.S. at 508.

Because F1 here sits in New Jersey, we must

apply the law “that would be applied by [New

Jersey] state courts,” id.—i.e., the entire

controversy doctrine. The answer is that easy;

our analysis should have begun and ended there.

App. 35 (brackets in original). Accordingly, the dissent

would have affirmed the district court’s dismissal

because “the majority and Daewoo appear to agree …

10

F1 refers to the court that renders the judgment the preclusive

effects of which are at issue in F2. See App. 8 n.3.

10

that this action would not survive under the entire

controversy doctrine.” App. 29.

Ultimately, the Ninth Circuit panel was divided on

a narrower articulation of the question presented

here—i.e., Does Semtek permit the preclusive effect of

a merits-based federal diversity court judgment to be

governed by a state preclusion rule that is not the same

as the rule applied in the courts of that state?

In answering this question, “[t]he majority followed

[New Jersey’s] two-system approach: apply one rule if

F2 is a New Jersey state courtp apply a different rule if

F2 is a federal court.” App. 35 (dissent). It

acknowledged that “the central holding in Semtek”

requires it to “implement New Jersey preclusion law

just as a New Jersey state court would” yet

simultaneously held that it must “apply[] the New

Jersey state court’s law as the Ninth Circuit.” App. 2324 (emphasis added). It faulted the dissent for wanting

to have “this court implement the doctrine as if it were

the New Jersey state court.” Id. (emphasis in original);

see also App. 35-36 (dissent).

By contrast, the dissent summarized its application

of Semtek’s federal common law:

Our task is to put ourselves in the New Jersey

state court’s shoes and to give the same

preclusive effect to New Jersey’s judgments as

New Jersey would. It is not for New Jersey to

tell any other court, including our own, to apply

the entire controversy doctrine differently than

it itself would. See Thomas, 448 U.S. at 270 []

(“[A] State is permitted to determine the

extraterritorial effect of its judgmentp but it may

11

only do so indirectly by prescribing the effect of

its judgments within the State.”).

App. 36.

REASONS FOR GRANTING THE WRIT

This case presents an ideal opportunity for this

Court to clarify the “federal common law govern[ing]

the claim-preclusive effect of a dismissal by a federal

court sitting in diversity” that it unanimously adopted

nearly two decades ago. Semtek, 531 U.S. at 508. The

Ninth Circuit’s majority decision sanctioned New

Jersey’s having one claim preclusion rule for use in its

own state courts and another claim preclusion rule for

use in other courts—federal and state. As articulated

by Judge Bybee in dissent below, this “flatly

contradicts Semtek.” App. 35. Further, it clashes with

federal interests that this Court has strived to

establish and maintain in this nation’s judiciary. At the

same time, the Ninth Circuit panel’s sharp divide

parallels the uncertainty that multiple regional circuit

courts have expressed on the question presented. It is

again time for “this Court [to offer] the last word on the

claim-preclusive effect of all federal [diversity]

judgments. 531 U.S. at 507 (emphasis in original).

I.

The Ninth Circuit’s Majority Decision

Directly Conflicts with this Court’s

Unanimous Semtek Decision

Semtek holds, as a matter of federal common law,

that the claim-preclusive effect of a diversity judgment

is governed by “the law that would be applied by state

courts in the State in which the federal diversity court

sits.” 531 U.S. at 508. A straight-forward reading of

this black letter law indicates that the claim-preclusive

12

effect of a diversity court judgment is the same as the

claim-preclusive effect of a corresponding state court

judgment. In the context of the facts here, the

preclusion law that would be applied by the New

Jersey state courts in determining the preclusive effect

of a prior merits-based judgment of a New Jersey state

court is the entire controversy doctrine. See App. 23.

The majority purported to square its application of

the extraterritorial bar of the entire controversy

doctrine with Semtek’s holding by “applying the New

Jersey state court’s law as the Ninth Circuit” and not

“as if it were the New Jersey state court.” App. 23-24

(emphasis in original). To quote the dissent, “[t]his

simply makes no sense.” App. 36. Parsing the

majority’s reasoning with Semtek’s black letter holding

is revealing: In determining the preclusive effect of the

prior New Jersey state court’s merits-based judgment,

a New Jersey state court would never act as if it were

the Ninth Circuit, a California district court, or any

other extraterritorial court. In other words, the

majority’s attempt at judicial forum metaphysics11 fails.

The majority also misapplied Semtek’s secondary

teaching that “some judgments … that do not pass

upon the substantive merits of a claim … do not (in

many jurisdictions) entail claim-preclusive effect.” 531

U.S. at 502 (emphasis in original). Here, there is no

dispute that the first federal diversity dismissal in New

Jersey district court “pass[ed] upon the substantive

merits” of the claims. App. 42 (dissent), 6. Although the

11

See also Chavez v. Dole Food Co., 836 F.3d 205, 231-232 (3d Cir.

2016) (en banc) (rejecting similar reasoning as “the jurisprudential

equivalent of holding up two mirrors up to one another”).

13

majority correctly observed that “Semtek foresaw and

acknowledged situations where state law statutes of

limitation would be preclusive in one state, but not

another,” it erred in assuming that “[t]he entire

controversy doctrine [and its attendant

extraterritoriality bar] is no different.” App. 24 (citing

531 U.S. at 503-04). They are different—and

dramatically so: statute-of-limitations-based dismissals

traditionally lack “claim preclusive effect in other

jurisdictions with longer, unexpired limitations

periods.” 531 U.S. at 504.12 By contrast, the entire

controversy doctrine is a “claim-preclusive rule (the

state rule)” and it applies only after a first court

“pass[es] upon the substantive merits of a claim.” Id. at

508, 502.13

Ultimately, the Ninth Circuit interpreted New

Jersey’s entire controversy doctrine to be a two-faced

claim preclusion law for decisions made on the

merits—with a first face for New Jersey state courts,

and second face for all other courts. Such a “state law

is incompatible with federal interests.” 531 U.S. at 509;

12

E.g., Joseph v. Athanasopoulos, 648 F.3d 58, 66-67 (2d Cir. 2011)

(finding that New York follows the “traditional rule” that

dismissals on timeliness grounds are not entitled to preclusive

effect); Havens v. Mabus, 759 F.3d 91, 98-99 (D.C. Cir. 2014)

(considering the effect of a time-based dismissal); see also Chavez,

836 F.3d at 227 n.119.

13

See also Smith v. Woosley, 399 F.3d 428, 434-35 (2d Cir. 2005)

(Semtek “makes clear that a district court’s dismissal of claims as

time-barred is not necessarily the type of merits decision that has

preclusive effect in subsequent litigation.”); Gonzalez, 545 U.S. at

532 n.4 (reciting types of dismissals that do not pass on the

merits).

14

Thomas, 448 U.S at 270. Thus, the majority’s

application of the doctrine’s extraterritoriality bar

“flatly contradicts Semtek.” App. 35 (dissent).

II.

The Question Presented Is Fundamental to

the Uniform Functioning of the Federal

Judiciary, Consistent with the Principles

of Federalism and Full Faith and Credit

Full Faith and Credit has long “require[d] federal

courts to give the same preclusive effect to state court

judgments that those judgments would be given in the

courts of the State from which the judgments emerged.”

Kremer v. Chemical Constr. Co., 456 U.S. 461, 466

(1982); see also App. 30 (dissent citing U.S. Const. art.

IV, § 1 and 28 U.S.C. § 1738.). Accordingly, “[a]ll [a

state] can do ‘to determine the extraterritorial effect of

its judgment’ is prescribe ‘the effect of its judgments

within the State.’” App. 31 (dissent quoting Thomas,

448 U.S at 270). The rationale for this limitation is

straightforward:

To vest the power of determining the

extraterritorial effect of a State’s own laws and

judgments in the State itself risks the very kind

of parochial entrenchment on the interests of

other States that it was the purpose of the Full

Faith and Credit Clause and other provisions of

Art. IV of the Constitution to prevent.

Thomas, 448 U.S at 272.

Pursuant to Full Faith and Credit—and

notwithstanding the extraterritoriality bar—the Third

Circuit has repeatedly and expressly applied the entire

controversy doctrine in affirming diversity court

dismissals that followed an initial merits-based ruling

15

in New Jersey state court. E.g., Chrystal v. NJ Dept. of

Law and Public Safety, 535 App’x 120, 122-123 (3d Cir.

2013) (“The sole issue before us is whether New

Jersey’s entire controversy doctrine precludes

Appellant from bringing his claim in the Federal

Action”); Reid v. Transp. Ins. Co., 502 Fed. App’x 157,

159-60 (3d Cir. 2012) (“Under the Full Faith and Credit

Act, 28 U.S.C. § 1738, ‘a federal court must give the

same preclusive effect to a state-court judgment as

another court of that State would give.” Parsons …, 474

U.S. [at] 523 ….””); Studio 45 Discotheque, Inc. v. City

of Union City, 292 Fed. App’x 197, 198 (3d Cir. 2008)

(“The entire controversy doctrine remains the law of

the state of New Jersey, applicable in state court

actions as well as cases requiring the application of

New Jersey state law in this [federal] Court.”); Zahl v.

Warhafig, 655 Fed. App’x 66, 75-77 (3d Cir. 2016).

Similarly, governed by Full Faith and Credit—and,

again, notwithstanding the extraterritorial bar—state

courts outside New Jersey have applied the entire

controversy doctrine in view of prior New Jersey state

court judgments. E.g., Samuelson v. McMurtry, 962

S.W.2d 473 (Tenn. 1998) (affirming dismissal under the

doctrine); Perini v. Leo, 147 A.D.3d 877 (N.Y. App. Div.

2017) (granting summary judgment under both the

entire controversy doctrine and res judicata); cf.

Gorelik v. Gorelik, 35 Misc.3d 1213 (N.Y. Sup. Ct. 2012)

(applying doctrine, but declining to preclude on fairness

grounds); Rong Chen v. Yeung, 33 Misc. 3d 886, 891-92

(N.Y. Sup. Ct. 2011) (applying doctrine, but declining

to preclude because the New Jersey case was still

pending).

16

Hence, Full Faith and Credit trumps the

extraterritoriality bar when the first judgment emerges

from a New Jersey state court. The Ninth Circuit

panel, however, was unable agree as to whether

Semtek’s federal common law rule trumps the

extraterritoriality bar in the same fashion.

In Semtek, this Court definitively adopted its

“federally prescribed rule of decision” to, in large part,

further the values of federalism. It reasoned that

“nationwide uniformity in the substance of the matter

is better served by having the same claim-preclusive

rule (the state rule) apply whether the dismissal has

been ordered by a state or a federal court.” 531 U.S. at

508. The Court further explained that

any other rule would produce the sort of forumshopping and inequitable administration of the

laws … since filing in, or removing to, federal

court would be encouraged by the divergent

effects that the litigants would anticipate from

likely grounds of dismissal.

531 U.S. at 508-09 (internal citations, quotation marks,

and ellipses omitted). In other words, Semtek held that

the value of uniformity counsels giving federal diversity

judgments the same full faith and credit that all courts

already owe to state court judgments.

The opinion below unreasonably expands Semtek’s

recognition of the traditional exception to Full Faith

and Credit for statute-of-limitations-based dismissals

to the point that it threatens to swallow Semtek’s clear

rule governing the preclusive effect of diversity

judgments. The majority leaves the door wide open for

states to create two-faced preclusion laws for their

17

merits-based judgments. This is irreconcilable with

both Semtek’s holding and its express rationale.

This Court should grant the Petition to clarify

whether Semtek intended to bring the claim-preclusive

effect of federal diversity judgments in line with the

well-established claim-preclusive effect of state

judgments. Only through such a grant can this Court

ensure uniformity in how state court and federal

diversity court judgments are treated.

III.

Circuit Court Opinions Evince Conflict and

Confusion on the Preclusive Effect of

Diversity Judgments

The need for clarity as to the extent that a state

may prescribe different preclusion rules for different

courts is squarely presented by the Ninth Circuit’s split

below. The issue, however, is not unique to this case:

the First, Third, and Fourth Circuits have all

recognized it, but they were able to sidestep it by ruling

on alternative grounds. Beyond this, clarification of the

federal common law rule governing the preclusive

effect of diversity judgments is sorely needed because

the Fifth, Sixth, and Eleventh Circuits appear to have

missed Semtek’s rule altogether, and have repeatedly

applied substantive federal preclusion principles in lieu

of state preclusion law.

A. The First, Third, and Fourth Circuits

Have Recognized the Question

Presented and Relied Upon Alternative

Grounds to Avoid Addressing It

The Third Circuit is the only other appellate court

to have considered the question presented in the

context of the entire controversy doctrine. In Hoffman

18

v. Nordic Naturals, Inc., a diversity case in the District

of New Jersey was dismissed with prejudice and a

second litigation in the same federal court was

dismissed as barred by the first. 837 F.3d 272, 275 (3d

Cir. 2016). In the second action, the district court held:

Contrary to Plaintiff’s contention that the entire

controversy doctrine does not apply to a federal

court’s interpretation of a prior federal decision,

the Third Circuit has consistently held that the

entire controversy doctrine is applicable in state

court actions as well as cases requiring the

application of New Jersey state law in this

[federal] Court.

Hoffman v. Nordic Naturals, Inc., No. 14-3291, 2015

U.S. Dist. LEXIS 4439, at *9-10 (D.N.J. 2015) (internal

quotations omitted; emphasis added).14

On appeal, the Third Circuit discussed the conflict

at the heart of this Petition, namely whether its preSemtek precedent holding “that the entire controversy

doctrine ‘is not the right preclusion doctrine for a

federal court to apply when prior judgments were not

entered by the courts of New Jersey’” is still good law.

Hoffman, 837 F.3d at 278-79 (quoting Paramount, 178

F.3d at 138). It found that Semtek “seems to suggest

that we should apply New Jersey’s entire controversy

doctrine to judgments rendered by federal diversity

courts in New Jersey,” but raised questions regarding

14

See also Wiggins v. String, No. 12-3176, 2013 U.S. Dist. LEXIS

40955, at *18 (D.N.J. Mar. 25, 2013). (indicating that the entire

controversy doctrine would apply under Semtek if jurisdiction of

the earlier federal action in New Jersey was based on diversity

jurisdiction.)

19

the potentially procedural nature of New Jersey’s longstanding claim preclusion doctrine. 837 F.3d at 278-79

(internal citations omitted). Ultimately, the Third

Circuit avoided ruling on this “interesting doctrinal

question” and affirmed the dismissal of the district

court, holding that it “need not resolve this conflict …

because under either New Jersey or federal claim

preclusion principles we come to the same result.” Id.

Months prior, in Chavez v. Dole Food Co., which

involved the preclusive effect of a timeliness dismissal

by a Louisiana diversity court, an en banc panel of the

Third Circuit gave the question presented here

substantial deliberation. 836 F.3d at 228 n.130-31. The

en banc court waded deep into the tension between its

1999 Paramount decision and Semtek; the degree to

which Erie principles might affect whether application

of state preclusion law is appropriate; this Court’s

ruling in Thomas that “states lack the power to

determine the extraterritorial effects of their own

judgments”; and even scholarly literature on the

subject. Id. (citing Thomas, 448 U.S. 261 and Stephen

B. Burbank, Semtek, Forum Shopping, and Federal

Common Law, 77 Notre Dame L. Rev. 1027, 1052

(2002)). Ultimately, however, the en banc court

concluded that “such an analysis raises certain deep

questions about the structure of our federal system

that are perhaps better left for another day” and ruled

on other grounds. Id. at 228.15

15

See also McHale v. Kelly, 527 Fed. App’x 149 (3d Cir. 2013)

(noting the tension and ruling along the same lines).

20

Similarly, in Hatch v. Trail King Industries, Inc.,

the First Circuit discussed the tension between Semtek

and Massachusetts law that allegedly would have

required the application of federal preclusion principles

to a prior diversity judgment rather than

Massachusetts’ own claim preclusion principles. 699

F.3d 38, 44-45 (1st Cir. 2012). That court declined to

resolve whether the Massachusetts law “is

incompatible with federal interests under Semtek

because under either federal or Massachusetts law, the

outcome is the same.” Id.

The First Circuit addressed the issue in the same

manner several years earlier in Herman v. Meiselman,

541 F.3d 59 (1st Cir. 2008). There, a First Circuit panel

noted that “[l]urking in this case is an interesting

question about whether the claim preclusion law of the

forum state plays a role in deciding the federal common

law question of whether the new complaint by

appellants is barred,” but found that deciding it was

unnecessary to affirm the dismissal below. Id. at 62

n.6.

Finally, the Fourth Circuit gave a nod to the

question presented in determining that Virginia claim

preclusion principles rather than federal preclusion

principles were to be applied to a federal diversity

judgment. Q Intern Courier v. Smoak, 441 F.3d 214

(4th Cir. 2006). That circuit expressly noted that

“neither party has argued that Virginia also has a

specific res judicata rule for cases — like the instant

one — in which the first action was litigated in federal

district court.” Id. at 219; see also id. at 218 n.1.

21

B. The Fifth, Sixth, and Eleventh Circuits

Apply Federal Preclusion Principles to

Diversity Judgments

The circuit split underlying the question presented

is unusual. It exists not between circuits that sanction

states’ two-faced preclusion laws under Semtek and

those that don’t, but rather between circuits that apply

Semtek’s federal common law rule (despite ongoing

debates over its finer points) and those that apply

federal preclusion principles to diversity judgments as

a matter of course.

The Fifth Circuit has steadfastly adhered to its preSemtek precedent that requires the application of

federal principles in “‘considering the collateral

estoppel effect of a prior federal [diversity] judgment.’”

Rabo Agrifinance, Inc. v. Terra Xxi, Ltd., 583 F.3d 348,

353 (5th Cir. 2009) (quoting Reimer v. Smith, 663 F.2d

1316, 1325 n.9 (5th Cir.1981)).

Likewise, the Sixth Circuit follows its pre-Semtek

precedent that in “case[s] involve[ing] successive

diversity actions, federal res judicata principles apply.”

Rawe v. Liberty Mut. Fire Ins. Co., 462 F.3d 521, 528

(6th Cir. 2006) (citing J.Z.G. Res., Inc. v. Shelby Ins.

Co., 84 F.3d 211, 214 (6th Cir. 1996)); Allied Erecting

Dismantling Co. v. Genesis Equip. & Mfg., Inc., 805

F.3d 701, 708-09 (6th Cir. 2015). But see Leonard v.

RDLG, LLC, 644 Fed. App’x 612, 616 (6th Cir. 2016)

(applying federal principles because the state preclusion

rule was “incompatible with federal interests”).

Finally, the Eleventh Circuit has—more often than

not—applied federal preclusion principles as a matter

of course in lieu of Semtek’s federal common law.

22

Compare CSX Transp., Inc. v. Bhd. of Maint. of Way

Emps., 327 F.3d 1309, 1316 (11th Cir. 2003) (“We now

hold that federal preclusion principles apply to prior

federal decisions, whether previously decided in

diversity or federal question jurisdiction.”) and Tampa

Bay Water v. HDR Eng’g, Inc., 731 F.3d 1171, 1179

(11th Cir. 2013) (quoting CSX) with Palmer & Kay, Inc.

v. Marsh & Mclennan Cos., 404 F.3d 1297, 1310 n.19

(11th Cir. 2005) (applying Georgia law in view of

Semtek).

Beyond the need to clarify the level of uniformity

between its Semtek and Full Faith and Credit

doctrines, this Court should grant the Petition to

underscore to the federal judiciary that the claim

preclusion law that governs federal diversity

judgments is presumptively not federal preclusion

principles.

CONCLUSION

The Petition for a writ of certiorari should be

granted.

Respectfully submitted,

LAURENCE M. SANDELL

Counsel of Record

LEI MEI

MEI & MARK LLP

818 18th St. NW, Ste. 410

Washington, DC 20006

202-567-6417 x717

lsandell@meimark.com

Counsel for Petitioners