Friday, December 7, 2007

Claim Preclusion in the Texas Supreme Court

A closely divided Texas Supreme Court held today that claim preclusion barred a wage claim.  The dissent has the better of the argument. 

The context is pretty simple.  Plaintiff had a wage claim against his former employer.  The legislature created a quick administrative process to file such wage claims, but plaintiffs seeking to use this process had to file within 180 days of when the wages were due.  This process is not exclusive--plaintiffs are free to pursue breach-of-contract actions, which are governed by a four-year statute of limitations.  Plaintiff filed an administrative claim.  It was too late for the 180-day period but well within the four years to file a private civil suit.  The Commission dismissed his claim as untimely, and the plaintiff filed a civil suit.  The majority concluded that the Commission's dismissal was claim preclusive.  Writing for four in his dissent, Justice Brister concisely, but persuasively, provides several reasons why the Texas Workforce Commission’s order is not a claim-preclusive judgment on the merits, including:

First, the Commission itself says so. In its amicus brief supporting Plaintiff's right to file suit in court, the Commission says “res judicata does not apply . . . because TWC’s order was not a judgment on the merits but a procedural dismissal for untimeliness.” How can the Court hold the Commission intended a merits dismissal when the Commission itself stipulates that it did not? *** 

Fifth, judgments based on limitations are usually considered rulings on the merits because a late claim can never be refiled any earlier (barring time travel). But an important exception applies here because there are two different limitations periods. As the First Restatement of Judgments stated in a comment:

Thus, if the plaintiff brings an action to enforce a claim in one State and the defendant sets up the defense that the action is barred by the Statute of Limitations in that State, the plaintiff is precluded from thereafter maintaining an action to enforce the claim in that State. He is not, however, precluded from maintaining an action to enforce the claim in another State if it is not barred by the Statute of Limitations in that State.

The Second Restatement of Conflict of Laws now makes the same point:

Thus, the plaintiff’s suit may be dismissed in state X on the ground that it is barred by the X statute of limitations. This judgment will preclude the plaintiff from thereafter maintaining an action to enforce the claim in state X. This judgment, however, binds the parties only with respect to the issue that was decided. It will preclude the plaintiff from maintaining an action to enforce the claim in another state only if the courts of the other state would apply the X statute of limitations . . .

The First, Second, Fifth, Seventh, and Tenth federal circuit courts all agree that while dismissals based on limitations are usually preclusive, they are not preclusive when a case is filed in two different systems that apply two different limitations periods. In such cases, as Wright and Miller state: “[i]f the second forum would decide independently to apply a longer period of limitations . . . the traditional rule has been that it is free to proceed with the second action.” While dismissal of an untimely claim may be preclusive if based on the substantive law governing the claim (Texas contract law’s four years), it is not preclusive if based on a shorter period designed as a procedural protection for the first forum (the Commission’s 180 days):   

Dismissal based on the limitations period established by the law that governs the claim is a judgment on the merits that precludes application of a different limitations period by another court. Dismissal based on application of the forum’s own shorter period for purposes of protecting the forum is not a judgment on the merits and does not preclude an action on the same claim in a court that would apply a longer limitations period.

Formatted without notation for readability.  The case name is  Igal v. Brightstar Information Technology Group. -- RR

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And so it gets even harder to get in front of a jury in Texas.

Posted by: Joe | Dec 10, 2007 9:46:13 AM

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