We currently have a brief pending in the California Court of Appeals dealing with the concept of collateral estoppel. Our client was sued for allegedly being the ‘alter ego’ of a corporation. We went to trial in 2010 and won. Judgment was entered in favor of our client on this sole allegation against him.
Fast forward to 2012. Our client and his daughter have been sued again. For the same thing.
We made a motion to the trial court asking that the lawsuit be dismissed on the grounds that the issue of our client’s alleged ‘alter ego’ [see article in Business Litigation section about alter ego] had already been determined in the 2010 trial. This is the concept of collateral estoppel—the issue has already been determined and therefore plaintiff is precluded from asserting it again.
The judgment in the 2010 case unambiguously read that judgment had been entered in favor of our client with respect to the claims alleged in the Second Amended Complaint.
The trial court, relying on its memory, stated that it didn’t think it had ruled on the alter ego issue (although that was the only issue against our client) and that the judgment was “inartfully worded.” It therefore denied our motion and ordered the case to proceed.
We have now filed for a peremptory writ of mandate with the California Court of Appeals, asking that the Appellate Court order direct the trial court to vacate its order and to sustain our demurrer (i.e., grant our motion to dismiss).
Our first argument is that the trial court exceeded its jurisdiction in collaterally attacking a final judgment. The time for appeal had long since passed. The established law is that even an erroneous final judgment is as conclusive as a correct one in terms of its preclusive effect.
The second issue is whether the issue of alter ego was ‘actually litigated’, a requirement when applying collateral estoppel. Plaintiff argued that, although it had sued our client for alter ego, had gone to trial, presented witnesses and made argument, it did not present any evidence on the alter ego issue and therefore the issue was not ‘actually litigated.’
We cited numerous cases in which the courts have held that all claims based on the same cause of action must be decided in a single suit rather than through piecemeal litigation. The law also states that even issues which were not alleged but could have been alleged are precluded. The fact that a party decides that it did not present enough or the right evidence at trial to establish its case does not allow it to sue again for the same thing.
We are awaiting the Court of Appeals ruling.
Laine T. Wagenseller is a business litigation attorney in Los Angeles. He is the founder of Wagenseller Law Firm, business and real estate litigation law firm. Wagenseller Law Firm can handle your legal disputes relating to your business or properties. For more information, contact Mr. Wagenseller at (213) 286-0371 or email@example.com.