Wednesday, June 13, 2007

Preemption and Res Judicata

In Lynn v. Sure-Fire Music Company, Inc., 2007 WL 1645402 (6th Cir. June 6, 2007), a panel of the Sixth Circuit took something so much for granted that the issue does not seem to have occurred to them. It may be that is because I misunderstand re judicata, and hope therefore that readers will be able to point me in the correct direction.

The plaintiff was the famous country singer Loretta Lynn, the "First Lady of Country Music." She had brought suit in a Tennessee state court against defendant, her longtime music publisher asserting, multiple state claims arising from their contract. The state court held the claims preempted. Ms. Lynn then filed suit in federal court alleging the exact same state law causes of action. The district court held the claims not preempted, and that it therefore lacked subject matter jurisdiction. Oddly, it was the defendant who appealed, apparently upset over the ruling that the claims weren't preempted.

I would have thought the state claims would be barred in federal court by res judicata. Indeed, in a reverse situation, the Ninth Circuit awarded attorneys fees for objectively unreasonable behavior, Domingo Cambeiro Professional Corporation v. Advent, 2000 WL 262590 (9th Cir. March 7, 2000). In that case, plaintiff brought claims initially in federal court which held the claims preempted. It then brought the same claims in state court. Defendants removed to federal court. The district court denied a motion to remand and awarded attorneys fee on the ground that plaintiff attempted to relitigate the preempted claims.

By contrast in Ms. Loretta's case, the Sixth examined de novo the preemption issue and affirmed the district court's ruling that the claims were no preempted, contrary to the state court. That resulted in Ms. Loretta with no way to go: the federal courts found they had no subject matter jurisdiction over what they deemed state claims, but after the state court held that the state claims were preempted as, in effect, federal claims.

7 comments:

Richard said...

Why would the state claims have been barred in federal court by a state court's explicit finding that the claims could not be brought in state court and therefore must be brought in a federal court?

Res judicata requires that an issue have been previously litigated to a decision on the merits.

Res judicata more ordinarily would have barred the district court in Lynn from finding the claims not preempted (as preemption had been previously litigated). However, since the preemption issue is related to subject matter jurisdiction, the district court had to look at it independently.

What I'm curious about is the next step...a motion for the state court to reconsider its preemption holding?

William Patry said...

Thanks, Richard, appreciating that a preempted claim deprives a state court of subject matter jurisdiction, but why for res judicata purposes isn't a decision that a state claim is preempted not a decison on the merits that is, that there is no valid state claim because it is a federal claim. That seems to be the approach that the Ninth Circuit took. And while I had the same question about moving the state court to reconsider, why would that work: a state court is entirely competent to decide that something brought as a state claim isn't. Why would a contrary decision by a federal court matter?

Mike said...

Given that neither the state court action nor the federal action was litigated "to the merits" could plaintiff not file a new action in state court, presuming statute of limitations issues and any relevant tolling allowed?

I also respectfully disagree with Mr. Patry that a preemption ruling by a state court is necessarily a ruling that the state law claim was "invalid." It required the state court to make a ruling as to the scope of federal law, not the underlying merit of the state-law claim. So I would imagine it open for further litigation.

William Patry said...

I am no expert on this, and so appreciate the education. Mike, I agree that a ruling that a state claim is preempted involves a determination about the reach of federal law. There are, though, different types of preemption. One could, for example, have a claim that is clearly cognizable under state law, but nevertheless have a ruling that it conflicts with a federal law. One could also have a claim that is cognizable under state law, but a ruling that the feds had fully occupied the field. Or, one could have a ruling that something stated as a state claim - like unfair competition - is really a copyright claim in sheep's clothes.

It is the last type that I believe was at issue in the Lynn case. If, then, she brought a contract claim, saying under the contract, I own the copyright, that may turn on whether the issue is reconveyance of the copyright if there is a breach of the contract, say for payment of royalties. I don't think that would be preempted. Or, she could claim that she didn't convey renewal rights and they are, therefore mine, a claim that is likely to be a state claim claim but perhaps infused with federal policy considerations of what a conveyance of renewal term requires.

In the run of the mill preemption case, a state court is just as competent to make a binding determination of whether the claim is or is not preempted. Since that determination was made by the state court, it would seem to be that one is barred from relitigating the exact issue in federal court. Whether it is a decision on the merits, it is a decision that could - and was - litigated in state court. In the Lynn case you have the situation of a federal court saying to a state court - you are wrong, this is a state claim. If I am a state court judge, I would say, its nice that you think so, but you are no higher on the pecking order than me on this issue. And, I do think this is what the Ninth Circuit case held. But, as I mentioned in the blog, the Sixth Circuit didn't even address the issue, which makes me feel I am indeed misunderstanding the issue.

Anonymous said...

Wouldn't the prior state court's determination actually be collateral estoppel and not res judicata in the subsequent state court after the case was bounced out of the federal court? In that instance, an error of law would permit the second sate court to set aside the judgment of the first state court. That error of law would be the determination that federal law was a preemption. To convincingly establish that error, however, Ms.Lynn may have to appeal the federal district court finding through the federal system.

Happily taking advantage of the right to post anon so that I don't embarrass others who know me in case I'm totally off the reservation on this.

William Patry said...

Anon: Happy for you to post that way. I have a thick skin and don't have mind people constanyly thinking I am off the reservation. Regardless of the label (and perhaps res judicata is now regarded as a form of estoppel), the point for me is that it isn't an error of law merely because a state judge and a federal judge have different views about the viability of a state claim. I would think the more important point is that the litigants had the opportunity to fully anf fairly make their case.

rumpole said...

This seems to be a really hard question, as the issues of subject matter jurisdiction and preemption are inextricably mixed b/c of the complete preemption doctrine. There is 6th Cir. law on this, as I recall.

But complete preemption only applies if the state claim is, in fact, a disguised copyright claim. And if it is, then the only thing that the federal court can do on removal is dismiss the state claim.

So I think I'm with the author on this one. The same issues are being litigated between the same parties. There may be exceptions to res judicata or the like that may apply (the doctrines are not absolutes), but those exceptions are narrow and awfully tough to get around.