Can someone please explain Semtek w/r/t preclusion and Erie

[gaucholaw]

It's by far the largest civpro thorn on my side. Thanks

[RedGiant]

So, Erie comes into claim preclusion if there's a difference in whether to apply state or federal law, depending on where the first action is brought and where the second action is brought (one suit location must be federal, based on diversity, since diversity is a requirement for any Erie analysis).

This is so-called "interjurisdictional preclusion", and it brings in Article I, Section 4, of the U.S. Constitution (Full Faith and Credit Clause - "Full Faith and Credit shall be given in each State to the public Acts, Records and judicial Proceedings of every other State.") and also 28 USC Sec.1738 (adds obligation for federal courts to respect state court judgments). Even though not specifically stated, these two ideas mean that federal court judgments must be respected by both federal and state courts.

Semtek originally sued Lockheed on a state law claim in CA state court, but Lockheed removed to federal court based on diversity jurisdiction. The federal court dismissed the first action "on the merits, with prejudice" based on CA's 2-year statute of limitations. Semtek then proceeded to file the same claim in MD state court, because the SoL had not yet run there. Then Lockheed moved to dismiss the second action based on claim preclusion. This went up to the Supreme Court.

The issue in the 2nd action was whether Rule 41(b) ["Unless the dismissal order states otherwise, a dismissal...--except one for lack of jurisdiction, improper venue or failure to join a party under R. 19--operates as adjudication on the merits"] really means that the default rule is to consider a dismissal on the merits unless the court states otherwise. The SC was worried about whether it would violate the Rules Enabling Act for a federal procedural rule (41(b)) to govern the law of claim preclusion in a state court (MD), although MD was evaluating the preclusive effect of CA law applied in federal court (from the first action).

The SC concluded that the "upon the merits" language of Rule 41(b) meant only that the same claim could not be filed in the same court, and did not govern whether the same claim could be filed in a different court. Therefore, in the end, the SC held that with respect to claim preclusion, MD state court should apply the CA rule that the statute of limitation dismissal was NOT on the merits and thus not entitled to claim preclusion (so it was find to proceed again in MD).

Bottom line: In Semtek, the SC held that the preclusive effects of a federal judgment rendered in a diversity action should be the same as would be attached to that judgment if a state court in that forum had rendered it. This flows not from statute (FRCP 1738) or the Constitution (Full Faith and Credit Clause), but from federal common law of prior adjudication. However, federal reference to state law will not dominate in situations in which the state law is incompatible with federal interests (Erie). [My casebook gives the example of, for instance, a state law not according preclusive effect to dismissals for willful violations of discovery orders--a federal court's interest in the integrity of its own procedural rules might justify an application of federal law (41(b)) contrary to state law, despite sitting that certain state.]

Hope this helps. It makes sense in my mind...but that doesn't mean I explained it well to you...May the CivPro gods shine on you.