Oooops! In Ruling on Collateral Estoppel Issue, What Does a Court Do if Its Earlier Decision Was Actually Wrong?

In what is likely the last few days of the current term of the United States Supreme Court, an army of prognosticators are looking up from their tea leaves into television network cameras as they compete to relate their predictions for the few remaining cases. Speculation abounds. As accustomed as we are to the prophesies by television’s talking heads, we can forget that sometimes in a diversity action a federal court has to do much the same thing–predict how a state court would decide a heretofore unlitigated issue. Sometimes the federal court–like the so-called legal experts–gets it wrong. When the reporter misses the mark, no real harm is done. When the federal court misses its prediction, however, the consequences to one or both of the parties can be significant.

Consider, for example, a recent decision from a federal district court in Missouri, Ideker v. PPG Indus., Inc., 2014 U.S. Dist. LEXIS 165 (W.D., Mo. Jan. 2, 2014), which is currently on appeal before the Eighth Circuit Court of Appeals (defendant, Harley-Davidson Inc. filed its appellate brief a few days ago). In an early January 2014 order, the federal district court held that notwithstanding the fact that its dismissal of an earlier-filed, similar civil action by the same plaintiff had been based upon the court’s erroneous prediction as to how Missouri courts would decide a workers’ compensation exclusive remedy issue, the doctrine of collateral estoppel nevertheless bound the plaintiff to the results of the court’s previous incorrect decision. The result is that the plaintiff lost her right to seek negligence damages against her employer for alleged exposure to benzene. 

Round One: Circumstances Require Federal District Court to Prognosticate

Plaintiff originally filed a civil action against multiple parties in 2010 (hereinafter referred to as “Case No. 10–0449”), alleging in relevant part that she was employed in Harley-Davidson’s paint/coating department from 2001 to 2009, that her duties required her to work with paint and other products manufactured by Defendant PPG Industries, and that the products contained benzene. Plaintiff further alleged that her exposure to these products caused her to develop Non-Hodgkin’s Lymphoma and that the negligence of her employer, Harley-Davidson, joined with that of the other defendants, causing Plaintiff to be exposed to benzene and develop the medical condition.

Harley-Davidson sought dismissal of Case No. 10–0449, contending in relevant part that since Plaintiff’s claim was based on an occupational injury, Plaintiff’s exclusive remedy arose under the Missouri Workers’ Compensation Law. In virtually every American jurisdiction, the issue would have been quickly resolved by the federal court; the exclusive remedy defense would have defeated Plaintiff’s claim against her employer, Harley-Davidson. At issue, however, were amendments to the Missouri’s Workers’ Compensation Law passed in 2005 by the state legislature. Plaintiff argued that the effect of the amendments was to jettison the exclusivity defense as to civil actions based upon occupational diseases. Plaintiff admitted that the exclusivity defense still applied to accidental injury claims.

Harley-Davidson contended that no such sea change had been brought about by the 2005 amendments and that the exclusivity defense existed as to both accidental injury and occupational injury claims. The federal district court judge, noting that the issue had not yet been passed upon by any Missouri appellate court, predicted that such state courts would agree with Harley-Davidson and so the district court dismissed Plaintiff’s claims in Case No. 10–0449 against Harley-Davidson without prejudice, so that Plaintiff might pursue her claim before the Missouri Labor and Industrial Commission (“the Commission”) [see Ideker v. PPG Indus., 2013 U.S. Dist. LEXIS 147927 (W.D. Mo., Oct. 15, 2013)].

Round Two: Missouri Courts Speak to the Exclusive Remedy Issue

After the dismissal of Case No. 10–0449 by the federal district court, two of the three divisions of the Missouri Court of Appeals reached an opposite conclusion from the federal court, holding that in light of the 2005 amendments, the Missouri Workers’ Compensation Law no longer provided the exclusive remedy for occupational disease claims [see State ex rel. KCP&L of Greater Mo. Operations Co. v. Cook, 353 S.W.3d 14 (Mo. Ct. App. 2011) (Western District); Amesquita v. Gilster-Mary Lee Corp., 408 S.W.3d 293 (Mo. Ct. App. 2013) (Eastern District)].

As noted by the federal court in subsequently filed civil action, discussed more fully below, while the third division of the Missouri Court of Appeals has not specifically spoken on the issue, it has at least indirectly endorsed the other divisions’ analysis that Missouri’s workers’ compensation statutes distinguished between “injuries by accident” and “injuries by occupational disease” [see Kirkpatrick v. Missouri State Treasurer as Custodian of the Second Injury Fund, 404 S.W.3d 327, 329 (Mo. Ct. App. 2012) (Southern Division) (citing Cook, 353 S.W.3d at 18). Parenthetically, I should add that amendments passed by the Missouri Legislature in 2013 that became effective January 1, 2014 reinstate the exclusivity defense in occupational injury cases.

Round Three: Federal Court’s Initial Take on Collateral Estoppel/Issue Preclusion

Following the dismissal of Plaintiff’s civil action in Case No. 10–0449 by the federal district court, Plaintiff filed her claim with the Commission; that claim remains pending. In August 2012, after the KCP&L decision by the Western District of the Missouri Court of Appeals noted above, Plaintiff also filed a new civil action in state court and when Plaintiff voluntarily dismissed various diversity-destroying defendants, the remaining defendants removed the case to federal court in March 2013. Harley-Davidson filed a Motion for Summary Judgment, contending that the issue had already been determined by the district court’s dismissal of Case No. 10–0449.

The federal district court, acknowledging that the decisions by the state’s intermediate appellate courts were persuasive, but not binding, said it was “hard not to be persuaded by the seeming unanimity of Missouri’s three appellate divisions.” In short, the district court agreed that its dismissal of Case No. 10–0449 was incorrect.

That didn’t end the matter, however. The court succinctly identified the issue: does collateral estoppel bind Plaintiff to the results of the Court’s previous incorrect decision?“ Harley-Davidson argued the answer was ”yes,” but the Court–at least initially–disagreed. And so, on October 15, 2013, the federal district court entered an Order denying Harley-Davidson’s Motion for Summary Judgment.

Round Four: Federal District Court Reconsiders; Collateral Estoppel Not Dependent Upon Correctness of Prior Decision

Harley-Davidson asked the district court to reconsider and upon such reconsideration, the Court entered its January 2014 decision dismissing Plaintiff’s case as to Harley-Davidson (again, the dismissal was without prejudice to the claim pending before the Commission). The court reasoned that when an issue arose and was litigated, the issue could not be re-litigated in the future as long as the facts surrounding the situation were the same and the law had not changed. If the law had changed in the interim, as Plaintiff contended was clear from the two Missouri appellate court decisions, then the first decision does not preclude relitigation.

The district court disagreed with Plaintiff’s contention. While KCP&L and Amesquita demonstrated that the dismissal of Case No. 10–0449 was wrong, the parties were nevertheless precluded from relitigating issues finally decided in incorrect orders. In reaching its earlier contrary result, the court said that it had relied on cases involving intervening changes in the law, but that upon reflection and consideration, the cases involving intervening changes in the law involved something other than an incorrect decision. Here there “was no intervening change of the law at all.” The change in the law had occurred before the instant case arose [emphasis added].

The court added that, ultimately, it was convinced that if the order in Case No. 10–0449 had been issued by a Missouri state court before Amesquita and KCP&L were decided, and the Plaintiff made no effort to obtain further review of that order, Missouri courts would preclude relitigation of the issue. The federal district court was, therefore, obligated to assign the same preclusive effect to the decision in Case No. 10–0449.

The district court indicated this resolved all issues against Harley-Davidson, the employer. It had no effect upon Plaintiff’s case against any of the other defendants. Since the court saw no reason to delay Plaintiff’s appeal of the court’s Order, it indicated Plaintiff could immediately appeal. That appeal, as noted above, is pending before the Eighth Circuit.

Parting Shots–Will There Be a Round Five?

Will the Eighth Circuit determine that the district court was wrong (again)? Will the Eighth Circuit agree that there was no intervening change in law? I’ll jump in with my own prognostication: while the district court was slicing words pretty thinly with its discussion of no “intervening” changes and its determination that any changes had occurred before the instant case was filed, I tend to agree that the issue here will be determined by the fact that Plaintiff did not appeal the dismissal of Case No. 10–0449. Had it done so, it might then have taken advantage of the Amesquita and KCP&L decisions.

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