A discernible trend in the law of collateral estoppel in recent decades has been expansion. What began as a narrow rule of issue preclusion between the original parties to an action that predated the related doctrine of res judicata, has grown into an aggressive doctrine in both scope and effect. The benefits of its use no longer confined to an original party, collateral estoppel may now be invoked by any litigant to prevent relitigation of previously determined issues.
Katz v. Eli Lilly & (and) Co.: Limitation of Collateral Estoppel in Products Liability Litigation, 14 J. Marshall L. Rev. 201 (1980), The John Marshall Law Review, Volume 14 | Issue 1 Article 8, Fall 1980.
The single greatest factor responsible for the frequency of the modern application of collateral estoppel is Justice Traynor’s opinion in Bernhard v. Bank of America National Trust & Savings Association, which laid to rest the exception riddled requirement of mutuality of estoppel. Freed from the strictures of mutuality, and encouraged in part by crowded court dockets, collateral estoppel acquired a broad scope. Supreme Court approval of the demise of mutuality followed in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, in which the Court permitted the defensive assertion of collateral estoppel by a defendant. The next step followed in Parklane Hosiery Co. v. Shore, in which offensive use of collateral estoppel was sanctioned by the Supreme Court as long as there was shown to have been a full and fair opportunity to litigate the issue in the prior action.
The possibility that such a potentially aggressive doctrine could have a major impact on litigation was foreseen early. Speculation soon gave way to substance upon the extension of offensive collateral estoppel to products. liability, where it was, welcomed as a valuable tool by plaintiffs in multiple-plaintiff actions involving the same product and similar injuries. The welcome may prove to have been premature in light of the recent federal district court decision in Katz v. Eli Lilly & Co.
In Katz, the court was faced with the question whether jurors might be deposed to determine the presence of a compromise verdict necessary to limit the collateral estoppel effect of a judgment. The resolution of this issue in Katz has effected a possible reversal of the expansive trend of collateral estoppel – at least insofar as it relates to products liability. 18 In doing so, the court may also have provided those defending product liability claims with a defense to collateral estoppel capable of farreaching abuse at the expense of the jury system.
The purpose of this paper is to examine in detail the holding of the district court in Katz and the authorities cited in support of that holding. Attention will also be given to the probable consequences of the court’s decision, both as it extends to the facts of the immediate case as well as future litigation in general. A final consideration will involve scrutiny of the other alternatives available to the court in rendering its judgment, and the relative merits of each.
FACTS AND HOLDING OF THE DISTRICT COURT
Prior to her daughter Benna’s birth in 1953, Esta Katz took the drug diethylstilbestrol (DES) which was prescribed by her physician to decrease the likelihood of miscarriage. Approximately eighteen years later it was discovered that Benna Katz suffered from adenocarcinoma of the vagina. Benna thereafter brought an action for damages in 1975 against Eli Lilly & Company (Lilly) as manufacturer of DES, alleging breach of warranty and negligence in the testing and distribution of the drug to her mother. Following the death of her daughter in 1977, Esta Katz brought a diversity action for wrongful death against Lilly.
During pretrial discovery, counsel for Lilly learned that a prior state court judgment against Lilly in a DES action, Bichler v. Eli Lilly & Co., was possibly the result of a compromise verdict. A juror allegedly stated that her vote for liability was conditioned upon the reduction of damages. To forestall the potentially disastrous collateral estoppel effect of the prior judgment, Lilly sought to depose two of the former jurors. Plaintif Katz then moved to quash the discovery subpoenas and vacate the notices of deposition.
In considering the motion, the district court noted that both federal and New York law generally bar the use of a juror’s statement to impeach or collaterally attack a verdict, but distinguished the present case as having a more narrow purpose. The court specified that the depositions were not sought to undercut the finality of the prior verdict, but rather to limit the preclusive effect of that judgment. It was thus held that where permissible investigation demonstrates a factual basis for a belief that a judgment used for collateral estoppel purposes was based on a compromise verdict, deposition of jurors known to have relevant information is warranted under the Federal Rules of Civil Procedure.
COLLATERAL ESTOPPEL OR JURY IMPEACHMENT: A LIMITED CHOICE
The Mansfield Rule
In deciding whether collateral estoppel should apply, the initial dilemma of the court, in Katz, was to establish a means of ascertaining whether the earlier verdict was in fact a compromise verdict, while at the same time placating the long-established Mansfield rule which prohibits a juror from impeaching his verdict.30 In support of her motion to quash, Mrs. Katz argued that jurors were incompetent to impeach their verdict and thus the depositions sought would violate the sanctity of the jury system. In addition, she asserted that the information sought would not be competent evidence, and therefore was not discoverable under the Federal Rules of Civil Procedure.
The court’s rationale in holding that the depositions were not sought for purposes of impeachment or collateral attack can be summarized in four basic steps. First, it relied on the representation of Lilly’s counsel that Lilly would not use the depositions in the New York state court to attack the Bichler verdict. Second, the court noted that both federal and state law barred the use of federal deposition in the New York state court should Lilly attempt to do so. Third, it was emphasized that the depositions sought would normally be within the scope of the federal discovery rules were it not for the Mansfield rule. Fourth, the court accentuated that there was no express prohibition against taking depositions aimed solely at cutting off the collateral estoppel effect of a judgment.
While it was probably correct in assuming that Lilly would be estopped from using the depositions in state court after asserting it would not do so, the Katz court nevertheless failed to address the question raised by the plaintiff’s argument. The contention of Mrs. Katz, as clearly exemplified by her cited authority, was that “public policy opposes such probing of motivations which inhere in a jury’s verdict. In the absence of good cause, jurors should be protected against post-trial efforts to ‘browse among their thoughts’ in an effort to invalidate their verdict.
The import of her argument was further clarified by her reliance on the express language of Rule 606(b) of the Federal Rules of Evidence which provides that a juror is not a competent witness in an inquiry into the validity of a verdict. The issue therefore was not whether Lilly would be able to use the Katz depositions in the New York system, but rather whether the taking of the depositions for use in the Katz litigation would, in itself, violate the impeachment rule.
The same criticism follows for the court’s citation of Bacharach v. General Investment Corp. , Empire Liquor Corp. v. Gibson Distilling Co., and Moore’s Federal Practice as support for the proposition that federal discovery depositions cannot be used in state litigation. The focus of both the cited cases and Professor Moore’s discussion is a procedural aspect of the federal rules of discovery. The cited authorities therefore provide scant protection against jury impeachment, which is hardly unexpected since it is a function they were never intended to perform. Although still good law, these authorities are nonetheless irrelevant to a determination as to whether permitting the deposition of the Bichler jurors was an attack on that verdict. The reliance of the Katz court upon them as authority for such a proposition is unjustified.
The court’s determination that the information sought would normally be discoverable but for the Mansfield rule is a further example of specious reasoning. The scope of federal discovery extends to any matter, not privileged, which is relevant to the subject matter of the pending action, and would certainly seem to include the alleged evidence of the compromise verdict. Yet this still fails to establish that the depositions in question are not an attack on the prior Bichler verdict within the meaning of the Mansfield rule. Plaintiff Katz was clearly arguing that the specific prohibitions of the Mansfield rule superseded the general discovery provisions. The court’s reasoning that discovery of the desired information might be permissible in this instance because it would be permissible generally is unpersuasive. The policy behind the broad scope of the federal discovery rules does not automatically obviate the policy behind the rule that a juror may not impeach his own verdict.
The final justification given by the court, that no absolute rule prohibited such deposition of jurors in order to curtail the collateral estoppel effect of a prior judgment, emerges as especially suspect when standing alone. The absence of an absolute prohibition that is violated by deposing jurors is slight authority for allowing such depositions. However, the Katz court held that such a result was dictated from a reading of New York case law, as exemplified by People v. DeLucia, Schrader v. Joseph H. Gertner, Inc.,4 8 and People ex rel Nunns v. County Court. The inherent weakness in such a broad reading is that none of these cases dealt with an investigation into the means by which a jury reaches its verdict, and are thus distinguishable from the Katz situation. Both the DeLucia and Schrader cases involved the testimony of jurors as to extraneous influence exerted on their deliberations, while Nunns concerned jurors testifying in a contempt proceeding against a juror who lied during voir dire.
The federal cases relied on by the Katz court, as illustrated by Clark v. United States, are distinguishable for the same reasons. Although the Supreme Court in Clark found jurors to be competent witnesses, the holding was limited to separate contempt proceedings against another juror. There was thus little or no effect on the jury deliberations or verdict by admitting such testimony.
While the cited cases may arguably advance the Katz court’s ultimate position in that they admitted testimony of jurors, each did so only upon a showing of some overt act independent of the jury deliberations. However, in Katz the alleged compromise occurred in the jury’s deliberation itself These cases therefore yield little support for the broad holding that deposing jurors would not constitute an impeachment of their verdict.
Thus, while the Katz court was technically correct in holding that the jury depositions could not be used for impeachment purposes in state court, it was not entirely accurate. The rule against a juror impeaching his verdict serves to protect more than the finality of the verdict itself. It extends also to the protection of jurors from harassment and embarrassment for their verdict, and thereby promotes free discussion in jury deliberations. Such protection is further designed to maintain stability, and foster public respect and confidence in the jury system. Little imagination is needed to realize that the potentially abusive tool of discovery could wreak havoc with jury deliberations in general. Since this would clearly violate the policies the Mansfield rule was intended to enforce, the Katz court improperly ignored contrary precedent.
Under New York law a juror may not be questioned about his verdict in a later proceeding. The only real exception is statements made by a juror as to outside influences upon the jury, since such acts are more susceptible to adequate proof and therefore less a danger to the privacy of the jury system. Otherwise, affidavits from jurors as to their deliberations are strictly disapproved.
The federal rule is much the same in effect. A juror only may testify as to some overt act known to all jurors, or as to some extraneous influence exerted upon the jury deliberations. Neither exception has been construed to include a compromise verdict. On the contrary, a juror’s affidavit regarding the existence of a compromise verdict has been explicitly excluded as incompetent evidence, because the alleged compromise is too akin to the absolutely protected mental processes of the jury.
Upon a consideration of the foregoing, the Katz court’s treatment of the plaintiff’s argument is troubling. Allowing the deposition of jurors from the prior Bichler judgment is arguably an impeachment of that verdict irrespective of the fact that the depositions are inadmissible in state court. Should any argument exist for distinguishing Katz from the contrary precedent, it at the very least merited full development and consideration by the district court in the text of its opinion. The fact that the court summarily dismissed Mrs. Katz’s argument with a minimum of discussion – much of it in a footnote – manifests a distinct intent to avoid the issue.
Offensive Collateral Estoppel
The district court’s ultimate decision to grant or deny defendant Lilly’s motion to depose the Bichler jurors necessitated a preliminary determination whether plaintiff Katz would be procedurally able to assert offensive collateral estoppel and whether it would be appropriate to do so where the prior judgment might have been based on a compromise verdict. In response to plaintiff’s motion to quash the discovery subpeonas, defendant Lilly conceded that state court judgments can have preclusive effect in federal court, and that in the instant case collateral estoppel would be procedurally permitted. Lilly asserted however, that under controlling New York law, the fact that the prior judgment resulted from a compromise verdict was grounds for denying it collateral estoppel effect in a later action.
The reasoning behind the district court’s holding can be summed up in five steps. First, it held that plaintiff Katz would be procedurally able to utilize offensive collateral estoppel under New York law. Second, the court noted that the equitable nature of collateral estoppel required exploration as to whether defendant Lilly had a full and fair opportunity to litigate in the prior Bichler action. Third, the district court emphasized that allowing an erroneous judgment to have preclusive effect would violate fundamental fairness. Fourth, it was held that permitting offensive collateral estoppel in the instant case would not advance the policies the doctrine was designed to promote. Finally, the court asserted that the fact Lilly did not physically have its day in court against Mrs. Katz was at least grounds for allowing Lilly to investigate a possible defense to collateral estoppel where the prior judgment was allegedly based on an erroneous verdict.
The Katz court initially recognized that there is no longer any requirement of mutuality of estoppel under the law of New York. All that need be shown for a plaintiff to utilize the judgment of a prior litigant against a defendant, is that the defendant had a full and fair opportunity to contest the same issue in the prior action. According to the New York Court of Appeals in Schwartz v. Public Administrator of the County of Bronx, the establishment of a full and fair opportunity “requires an exploration of the various elements which make up the realities of litigation. Furthermore, in listing those elements, Schwartz specifically included “indications of a compromise verdict. Thus, should Lilly be able to establish the presence of a compromise verdict in Bichler, plaintiff Katz would be precluded from the benefit of its collateral estoppel effect. Accordingly, the judge in Katz held that fundamental fairness required that Lilly be given “every reasonable opportunity to explore the factual basis for a claim that the judgment asserted as binding … should not be accorded such an effect because [that judgment was] based on a compromise verdict.
It is undoubtedly true that the equitable nature of collateral estoppel requires an inquiry into whether there was a full and fair opportunity to litigate. As noted by Professor Currie, no legal principle, perhaps least of all the principle of collateral estoppel, should ever be applied to work injustice. However, in attempting to avoid injustice to Lilly, the Katz court should not have neglected competing interests. The harm to the plaintiff might be outweighed by the harm that would result from the alternative. There is a very real possibility that an order granting “every opportunity to explore” could be used as a broad mandate to harass the Bichler jurors for indications of a compromise verdict that may not even exist. A better rule would specifically limit the extent of the investigation to avoid prejudice to the individual jurors themselves, and the jury system in general.
According to Professor Moore, once a final judgment is entered it is entitled to collateral estoppel effect whether based on a compromise verdict or not. Yet the Katz court held that the blind application of this proposition to a situation where a stranger asserts the judgment offensively violates basic notions of fairness. In support of its contention, the court noted that the purpose of collateral estoppel was to protect a party from the burden of relitigating an issue previously decided, and to advance the public interest in minimizing litigation.
Since Mrs. Katz was a stranger to the original Bichler action the court emphasized that she could not claim the need to be free of the burden of repeated litigation. The court further held that:
whether or not the public interest … would be served by broad application of non-mutuality of estoppel, it is clear that while Lilly has had its day in court against Joyce Bichler in New York Supreme court, strictly speaking it has not had an opportunity to meet plaintiff here who was a stranger to the State court action.
The court went on to assert that while non-mutuality was not determinative as to whether collateral estoppel should apply, “it does suggest at a minimum that where the original judgment is questioned on the ground. . . of a compromise verdict, a court must in fairness provide a litigant every opportunity to explore the basis for a defense to offensive use of the judgment as collateral estoppel against it. The court then granted the defendant’s motion to depose the Bichler jurors.
A careful scrutiny of the court’s reasoning reveals some logical inconsistencies. While it is true that Mrs. Katz cannot claim the need to be free of relitigation, such need is no longer necessary since the demise of mutuality. At most it is a possible mitigating factor in the consideration whether collateral estoppel applies. Also, though the court admits that the prior physical meeting is not determinative as to whether collateral estoppel should apply, it nevertheless seems to use this factor for such a determination. In short, the Katz court appears to be effecting a limited return to mutuality where other factors militate against the application of offensive collateral estoppel.
Despite the partial return to mutuality, the Katz court’s decision to allow the depositions seems to conform to the letter and spirit of the New York law. New York precedent provides that collateral estoppel should be based on principles of fairness, and that “each case must be examined to determine whether, under all the circumstances, the party said to be estopped was not unfairly or prejudicially treated in the litigation in which the judgment sought to be enforced was rendered.
Moreover, the determination whether judgment was rendered pursuant to a full and fair opportunity to litigate includes an examination into whether there were indications of a compromise verdict. The question remains, however, whether the court’s holding that discovery depositions were in order was too broad a solution to a narrow problem.
Policy Considerations
While the partial return to mutuality of estoppel implied by the Katz court may not seem initially desirable, it fits comfortably within the broad discretion granted by the Supreme Court in Parklane where offensive collateral estoppel is concerned. Recognizing that strict application of collateral estoppel offensively could often serve to work an injustice, and yet not wanting to abandon the doctrine for its obvious benefits, the Supreme Court held that the test should be whether the trial judge considered it fair to apply offensive collateral estoppel. Under this nebulous standard, mutuality might often be the factor to tip the scales in preventing issue preclusion.
Given the fact that Lilly is defending in excess of 500 DES actions, with more still likely to be filed, the possible repercussions of collateral estoppel could be disastrous. A judgment finding Lilly liable in one action could be conclusive of the liability issue in all later actions by precluding Lilly from relitigating the issue. In such circumstances a court would be hesitant to give preclusive effect to a genuinely valid verdict, let alone a suspect one. Therefore the Katz court’s attempt to give Lilly an opportunity to escape the preclusive effect of the Bichler verdict seems entirely justified. Yet the problem arises in the fact that the court fails to come to grips with the realization that deposition of the jurors will violate public policies favoring finality and protection from harassment. The brief treatment accorded this argument in the text of the opinion reflects both the likelihood of a violation of the Mansfield rule and the court’s hesitancy to deal with it.
The Katz holding can perhaps best be seen as a policy decision. The court’s first major alternative was to deny the deposition to avoid conflict with the impeachment rule, but this would result in Lilly being bound in a successive number of actions by a possibly invalid prior judgment. The second major alternative was to permit the depositions and thereby give Lilly a chance to avoid the preclusive effect of a defective judgment, but this would impinge on the Mansfield rule. Given such an unattractive choice between two conflicting considerations, the court understandably attempted to create a third alternative. The result was a holding which risks the intrusive effect of the depositions on the jurors to forestall the possible prejudicial effect of collateral estoppel, while at the same time it attempts to distinguish the contrary impeachment precedent.
The court could have obtained the same result, however, through a more thorough analysis. Rather than summarily ex- • plaining the Mansfield rule away, the court instead should have attempted to strike a balance that would protect the function of the jury and yet prevent the preclusive effect of the compromise verdict. Such a result could have been achieved by distinguishing a compromise verdict from the absolutely protected mental processes of the jury. Whereas the mental processes need protection because they are known only to each individual juror and therefore generally unprovable, a compromise verdict needs no such protection because it is an objective occurrence known to all jurors. It thus could be identified, exposed, and proven without disturbing the remainder of the jury’s deliberation. Moreover, the exposure of an impermissible compromise would not impede honest deliberations of a jury, but rather would have the beneficial effect of deterring jurors from compromising their verdict.
Alternatively, the Katz court could have prevented the collateral estoppel effect of the Bichler judgment and not reached the impeachment issue at all. To do so it would have been necessary to deny the preclusive effect of the Bichler judgment when the plaintiff asserted it. This result would be in accord with the holding in Schwartz v. Public Administrator of the County of Bronx, which suggested that indications of a compromise verdict denoted a lack of a full and fair opportunity to litigate. Further support could be derived from Zdanok v. Glidden Co., in which the court held that offensive collateral estoppel might not be appropriate to the situation where a defendant faces a series of similar actions forcing him to risk losing all in each successive trial although unable to win more than one at a time. Authority could also be found in other jurisdictions where offensive collateral estoppel has been denied due to other overriding considerations, or on grounds of basic fairness. If nothing else, the Katz court could have at least temporarily denied the preclusive effect of the Bichler judgment pending its appeal in state court. This would be a reasonable alternative. Giving collateral estoppel effect to a judgment later found to be erroneous on appeal would only lead to inconsistent judgments and repeated injustice.
Whichever means was used to ascertain whether collateral estoppel should apply, the court should nevertheless have avoided the potentially intrusive discovery depositions. While the liberal discovery provisions are possibly the most notable advance of the federal rules, they are also the most capable of being abused. Further, the impact of such abuse would be particularly acute on jury deliberations which depend heavily on an element of secrecy for their survival.
Therefore, even though discovery may be especially crucial in a products liability action, it still should not be extended to jury deliberations without some form of limitation. A possibility would be for the trial judge in Katz to hold an evidentiary hearing and conduct a court-controlled investigation into the alleged compromise verdict. Should this not be feasible owing to a crowded docket, the court should at least provide a protective order which strictly limits the time, place, and scope of the depositions sought by Lilly. In this way the need for exploration could be satisfied without any undue intrusion into the privacy of the individual jurors.
CONCLUSION
A careful reading of the Katz holding suggests alternatives. Although a court cannot be expected to appease all conflicting interests in rendering a judgment, the Katz court nevertheless could have achieved a more just result through a better analysis. Part of every court’s analysis should include a look beyond the immediate case to the future impact of its holding.
Much of the impact of Katz remains questionable because it was a district court opinion rendered under unique circumstances. Further, any opportunity for appellate interpretation of the holding has been precluded by an intervening settlement between the parties. Nevertheless, the Katz holding remains significant for what it portends.
Katz illustrates the dangers of strict application of offensive collateral estoppel. No longer restrained by mutuality, offensive collateral estoppel remains virtually unchecked in its potential for injustice. While a return to the absolute rule of mutuality of estoppel is not desirable, Katz reveals the need for standards to guide a trial court in its consideration of whether offensive collateral estoppel should apply.
The Katz decision also indicates the need for a re-examination of the Mansfield rule. Although protection of the thought processes of jurors is indispensable to the jury system, it is questionable whether such protection need extend to an impermissible compromise. An individual’s right to a fair trial should mandate disclosure of overt acts of compromise.
Finally, Katz could be a dangerous holding if used as authority for further discovery of jury deliberations. Though discovery was arguably necessary to prevent injustice in Katz, the need for limitations on such discovery was even more essential. By providing specific guidelines for the discovery procedure, the Katz court could have insured protection of the jury system and resolved this sensitive issue for later courts should it ever recur. By failing to do so, the court’s holding exacerbated the issue so as to assure its recurrence in future litigation.
Steven Polick, 1980.
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