Helping Protect Against Lawsuits: The Ties That Bind… Or Don’t…

Provided by Setliff Law Firm

Imagine that your employee happens to be at a work site in the course of his job, doing exactly what he’s supposed to be doing, alongside workers employed by other companies who similarly are working diligently.  Now let’s say that your employee is using a piece of equipment that malfunctions in such a way that it causes injuries, not just to your employee but to some of the other workers nearby.  You perform a preliminary investigation in accordance with your standing operating procedure, determine that neither your employee nor any of the nearby workers did anything wrong, and that the equipment failure did not result from any negligence or wrongdoing by anyone at the site.  If your employee was injured, you guide him on how to pursue a workers’ compensation claim, his claim is paid, and you assume that other workers and their employers and proceeding in similar fashion.  As far as you know, that’s that, and you go on with business as usual.

Then, some time later, you receive a demand letter from an attorney representing one of the other injured workers advising you that his client blames you and your employee for causing her injuries, and that unless you pay her demand she will file suit against you.  You have already determined no one on your end was at fault, so you reject the demand, and the injured worker then sues your company.  You (or your insurer) hire defense counsel, and the litigation begins.

So far, nothing appears out of the ordinary in this scenario, right?  Then . . . in the course of the litigation, you learn that the plaintiff had also instituted a workers’ compensation claim for her reported injuries (not surprisingly), and that the workers’ compensation claim has resulted in an award for the plaintiff determining both the cause of her injuries and the severity of those injuries, including the amount of past and future medical costs and wage loss.  You had nothing to do with the workers’ compensation claim,

of course, so you receive that news with a shrug of your shoulders.  And then, your attorney hits you with two words you’ve never heard before:  collateral estoppel.  Very roughly translated from the quaint legalese, that means, “You just got stuck with a fact determination made in somebody else’s lawsuit, and it doesn’t matter how much evidence you have that the other lawsuit got it wrong.”   If this scenario sounds incredible or unbelievable, it isn’t.  “Collateral estoppel is a judicially created issue preclusion doctrine that promotes finality, conserves judicial resources, and prevents inconsistent decisions.” Allen v. McCurry, 449 U.S. 90, 94, 101 S. Ct. 411, 66 L. Ed. 2d 308 (1980); Gibson v. Trant, 58 S.W.3d 103, 113 (Tenn. 2001); State ex rel. Cihlar v. Crawford, 39 S.W.3d 172, 178 (Tenn. Ct. App. 2000). It bars the same parties or their privies from relitigating in a later proceeding legal or factual issues that were actually raised and necessarily determined in an earlier proceeding. Barnett v. Milan Seating Sys., 215 S.W.3d 828, 835 (Tenn. 2007); Massengill  [*535]  v. Scott, 738 S.W.2d 629, 631-32 (Tenn. 1987); Blue Diamond Coal Co. v. Holland-Am. Ins. Co., 671 S.W.2d 829, 832 (Tenn. 1984). 

“Privity connotes an identity of interest, that is, a mutual or successive interest to the same rights." State ex rel. Cihlar v. Crawford, 39 S.W.3d 172, 180 (Tenn. Ct. App. 2000). In Tennessee, the party invoking collateral estoppel has the burden of proof.  To prevail with a collateral estoppel claim, the party asserting it must demonstrate (1) that the issue to be precluded is identical to an issue decided in an earlier proceeding, (2) that the issue to be precluded was actually raised, litigated, and decided on the merits in the earlier proceeding, (3) that the judgment in the earlier proceeding has become final, (4) that the party against whom collateral estoppel is asserted was a party or is in privity with a party to the earlier proceeding, and (5) that the party against whom collateral estoppel is asserted had a full and fair opportunity in the earlier proceeding to contest the issue now sought to be precluded. Gibson v. Trant, 58 S.W.3d at 118 (Birch, J., concurring and dissenting) (citing Beaty v. McGraw, 15 S.W.3d 819, 824-25 (Tenn. Ct. App. 1998)).

So, back to our scenario – what does all this mean in your case?  Whether the final award entered in the plaintiff’s related workers’ compensation claim is going to bind you to the Commission’s fact determinations on the cause and nature of the plaintiff’s injuries, her medical costs and wage loss, and prognosis for improvement in her condition will depend on whether: 1) your interests as they appear in the separate lawsuit the plaintiff has filed against you are deemed “identical” with those of the plaintiff’s employer and its workers’ compensation insurer in their defense of the comp claim; 2) the issue was actually raised in the previous comp claim and decided on its merits; 3) the judgment in the comp claim became final; 4) that you were a party or in privity with a party to the comp claim; and, 5) you had a full and fair opportunity to contest the issue during the comp proceeding.  In other words, it all depends on whether you are determined to be the employer’s “privy,” as well as whether the fact determinations made in the comp claim or other related lawsuit were the result of an actual adjudication, as opposed to a compromise settlement.  That determination must necessarily be made on a case-by-case basis; there is no one-size-fits-all answer. The scenario imagined here is just one of any number of ways that you might find yourself bound to a judgment in a lawsuit you’ve never even heard of, under the doctrine of collateral estoppel.  Having someone on your staff, or your outside legal counsel, monitor local court dockets and the Workers’ Compensation Commission in the weeks and months following a reported workplace injury – even one not directly involving your own employees – is just one way to try to avoid the nasty surprise of issue preclusion.  Here as in some many other areas of business life, being proactive can spare you a great deal of headache and heartache later, particularly with the advice of experienced legal counsel.  Avoiding surprises is always a good rule of thumb in business – especially when it comes to litigation.  If you have questions on this point or need guidance, please contact Kevin Streit  (kstreit@setlifflaw.com) at (804) 377-1270 or Steve Setliff (ssetliff@setlifflaw.com) at (804) 377-1261.