Mitchell Jay Stein v. Securities and Exchange Commission

This Court has repeatedly instructed that the use of collateral estoppel is limited to situations where “the issues in the two cases are … identical,” B & B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 1306 (2015) (citation omitted), were actually litigated and determined in the first proceeding and are “essential to the judgment.” Bobby v. Bies, 556 U.S. 825, 834 (2009) (citing Restatement (Second) of Judgments § 27 (1980)). In Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979), the Court identified additional considerations of fundamental fairness when the doctrine is applied offensively, resolving a circuit split regarding the Seventh Amendment right to a jury trial. The courts of appeal are now deeply divided regarding the application of these parameters where the first action involved multiple or alternative theories or grounds for recovery. The Ninth Circuit’s decision below widens the split considerably by affirming the use of offensive collateral estoppel in granting an $11 million summary judgment in favor of the SEC where the SEC’s theory of fraud was not at issue in the prior criminal prosecution for securities fraud. Indeed, even the district court expressly recognized the need to “disregard[]” the SEC’s inconsistent theory of the case in order to justify giving it summary judgment. App.-70. The question presented is: Whether offensive collateral estoppel may be used to enter summary judgment on an alternative theory that was never presented to the trier of fact in the antecedent action.