United States Court of Appeals defines criteria for applicability of principles of Res Judicata

The affirmative defence of res judicata requires that the party asserting such a bar bear the burden of showing that the principle applies. To ascertain whether there is a ‘same cause of action’ between two different suits the court has to look into whether the suits involved similar statutes, similar acts, similar wrongs, and necessitated similar evidence to support the similar material facts alleged. The principle of Res Judicata can be applied only if these criteria’s are fulfilled.

The Facts of United States v/s Athlone Industries, Inc.

An action was instituted on February 19, 1982, by the United States, on behalf of United States Consumer Product Safety Commission seeking the assessment of a civil penalty against Athlone Industries, Inc. pursuant to sections 15 and 20 of the Consumer Product Safety Act, 15 U.S.C. $$ 2064, 2069.

Athlone, was the primary distributor of automatic baseball pitching machines manufactured by Advance Machine Company, Inc. The government’s complaint charges that Athlone and Dudley Sports Company, a division of Athlone, failed to report to the commission certain information regarding these machines, as required by the act. Athlone moved for summary judgement on the ground that the civil penalty suit was barred by Res Judicata, the applicable statute of Limitations, and the commission’s failure to determine the amount of penalty to be sought prior to commencing the action. The district court concluded in the oral opinion that the commission’s case was barred by res judicata, without reaching Athlone’s other claims.

The United States District Court for the District of New Jersey granted a summary judgment in favour of Athlone concluding that the present case is barred by the principles of Res Judicata, without reaching Athlone’s other claims.  Being aggrieved by this decision of District Court, an appeal is preferred by the United States in the Court of Appeals. The sole issue thus before the Court of Appeal is:

  • Whether or not, the present suit is barred by the principles of Res Judicata?

The Court of Appeal Decision:

The Consumer Product Safety Act was enacted by the Congress to “protect the public against unreasonable risks of injury associated with consumer products”. Section 15(b) of the Act provides that a manufacturer, distributor or retailer who obtains information reasonably supporting the conclusion that one of its products contains a defect which creates a “substantial product hazard” must immediately inform the Commission, unless it has actual knowledge that the commission had been adequately informed of the problem. Section 19 of the Act makes it unlawful to fail to furnish information required by Section 15(b) and section 20 provides civil penalties for violations of section 19. By virtue of section 12 of the Act, the commission in its own right may seek injunctive and declaratory relief against any person who is a manufacturer, distributor or retailer of an “imminently hazardous consumer product” in order to protect the public from such risks.

Additionally, the affirmative defence of res judicata requires that the party asserting such a bar bear the burden of showing that the principle applies. Application of the claim preclusive aspect of the res judicata doctrine requires a showing by the claimant that there has been:

  1. A final judgment on the merits of a prior suit involving,
  2. The same parties or their privies and,
  3. A subsequent suit based on the same cause of action.

The court held that the commission’s imminent hazard action under section 15 and the civil penalty suit brought on the commission’s behalf by the United States did not involve the “same cause of action”.

In order to consider whether there is “Same cause of action” in order to effectuate res judicata, the court has to look into:

  • Whether the wrong for which the redress is sought is the same in both actions
  • Whether the theory of recovery is the same
  • Whether the witnesses and documents necessary at the trial are the same (that is, whether the same evidence necessary to maintain the second action would have been sufficient to support the first)
  • Whether the material facts alleged are the same

In the present case, the court held that the suits involved different statutes, different acts, different wrongs, and necessitated different evidence to support the different material facts alleged, and thus the principles of res judicata cannot be applied. Thus the district court opinion is reversed.

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