Imagine a situation where the U.S. Securities and Exchange Commission (SEC) is looking to enforce the antifraud provision of the Securities Exchange Act of 1934 against two different companies, arising out of the same transaction. Now suppose the SEC sues Company A first. However, the court finds no violation based on the factual determinations of the transaction and renders a judgment refusing to impose liability against Company A. Unsatisfied, the SEC decides to sue Company B under the same provision. Company B, however, believes the factual issues were already litigated and determined against Company A and wants to preclude relitigation by simply applying the previous factual determinations to the current case. Can they do so? This legal mechanism is classified as defensive nonmutual issue preclusion.1See 47 AM. JUR. 2D Judgments § 551, Westlaw (database updated August 2019). The United States Supreme Court has not addressed whether this mechanism is available against the federal government.
This Note examines the use of defensive nonmutual issue preclusion against the federal government—the basic question being whether the doctrine is available. In United States v. Mendoza, the Supreme Court announced that offensive non-mutual issue preclusion was unavailable against the federal government.2United States v. Mendoza, 464 U.S. 154, 164 (1984). The policy interests announced in Mendoza support expanding that exception to the defensive context.
The Introduction will explain the pertinent terminology and set forth nonmutual issue preclusion’s doctrinal development. Part I will provide a detailed analysis of how the law currently stands. Part II will analyze the current legal framework and argue that defensive nonmutual issue preclusion is likely unavailable against the federal government. Primarily, this extension flows from the policy arguments postulated in United States v. Mendoza.