Issue Preclusion Explained: Why Courts Refuse to Re-Litigate Settled Questions

By Arjan Bir Sodhi for Lex Republica

Civil litigation values accuracy, but it values finality almost as much. At some point, the law draws a line and says that a particular question has been answered well enough. That principle is known as issue preclusion, also referred to as collateral estoppel. Unlike claim preclusion, which bars entire causes of action, issue preclusion operates more narrowly by preventing parties from relitigating specific factual or legal issues that were already decided in a prior proceeding.

Courts have long recognized that without some form of issue preclusion, litigation would spiral endlessly. Parties could repeatedly relitigate the same disputes, merely repackaged in new lawsuits, draining judicial resources and undermining confidence in judicial outcomes.

A hypothetical makes the doctrine concrete.

Consider a borrower who falls behind on his auto loan. The lender sues in state court seeking repossession, alleging nonpayment. The borrower defends on two grounds. First, he claims he made the required payments. Second, he argues that the loan agreement itself is unenforceable because it failed to include disclosures required by consumer protection statutes. The case goes to trial. Both sides present evidence on payment history and on the validity of the loan agreement. The jury returns a verdict for the lender, and judgment is entered.

Later, the borrower cures the default and keeps the car. Months pass. He then falls behind again, this time missing a different set of payments. The lender files a second lawsuit, again seeking repossession. The borrower raises two defenses: that the second lawsuit is barred by claim preclusion, and that the loan agreement is invalid for the same disclosure defects raised in the first case.

The first defense fails immediately. Claim preclusion does not apply because the lender is not attempting to relitigate the same claim. The second lawsuit concerns a new default based on payments that were not even due when the first lawsuit was filed. Courts routinely reject claim preclusion in this setting because the later claim could not have been brought earlier.

The second defense, however, is barred.

Although the lender’s claim is new, the borrower’s challenge to the validity of the loan agreement is not. That issue was fully litigated in the first case, submitted to the jury, and necessarily resolved in the lender’s favor. The jury could not have returned a verdict for the lender without determining that the loan agreement was legally enforceable. Allowing the borrower to relitigate that same issue would defeat the very purpose of adjudication.

This is precisely the role of issue preclusion. When an issue of law or fact is actually litigated, determined by a valid and final judgment, and essential to that judgment, it is conclusive in subsequent litigation between the same parties, even when the later lawsuit involves a different claim. That formulation closely tracks the Restatement (Second) of Judgments § 27 and has been widely adopted by courts.

The principle is based on fairness as well as efficiency. The issue preclusion will be relevant only if there was a fair opportunity to litigate the matter that surfaced in court in the first trial. The court considers whether there was an opportunity to offer evidence, conduct cross-examinations, as well as argumentation on this matter in court. If this was provided, there would be no compelling need to gain another shot.

One such case is Felger v. Nichols, 370 A.2d 141 (Md. 1977), decided by the Maryland Court of Appeals, illustrating the applicability of this doctrine. In this case, an attorney sued his client for payment for professional services that were allegedly due as a result of representation that took place. However, the defense that was raised here was that the services provided were incompetent; thus, the services were not worth the payment that was required.

In this case, judgment was granted in favor of the attorney once evidence was presented as to the quality of the representation provided.

The plaintiff then brought a malpractice claim against the same attorney for the same legal work. The court determined that while the malpractice claim was not barred from being brought under claim preclusion, issue preclusion applied. The attorney’s adequacy of representation was actually in controversy in the lawsuit over attorney fees, and it was essential to the court’s decision in the attorney fee dispute that attorney fees be awarded. As such, the attorney’s contention had already been previously litigated and lost, and the court applied issue preclusion due to that fact.

The court emphasized that issue preclusion focuses on what was actually decided, not on how the claim was labeled. Whether the issue arose as a defense in the first case or as an affirmative claim in the second was irrelevant. What mattered was that the factual determination had already been made.

At the same time, courts remain cautious. Issue preclusion does not apply to issues that were merely assumed, mentioned in passing, or resolved unnecessarily. Findings that are not essential to the judgment carry no preclusive effect. This limitation protects litigants from being bound by determinations that may not have received careful consideration or that could not realistically be appealed.

In addition, issue preclusion does not guarantee a perfect outcome. As courts have said time and again, preclusion ensures finality, not perfection. When an issue is determined erroneously, appeal, and not relitigation before another lawsuit, is appropriate. As explained correctly by the Supreme Court, “findings of fact are not statements of mere fact, but conclusions stated in an adversarial process that, like all processes, must come to an end.”

Nonetheless, fairness becomes the guiding factor. When a party did not have sufficient incentive to pursue a case in the original dispute, or when there were procedural barriers or when it was not able to gain appellate relief, then a court may refrain from using issue preclusion.

Issue preclusion has been found to pragmatically represent a balance. Issue preclusion manifests an understanding of and respect for the finality of prior judicial decisions. Simultaneously, it shows an understanding that just because a decision has previously been rendered, it is not always deserving of preclusive effect.