923 F.3d 685
9th Cir.2019Background
- Wojciechowski worked for ClearEdge Power and was terminated; ClearEdge entities then filed bankruptcy.
- He brought an adversary class action in bankruptcy alleging ClearEdge (and related entities) violated the WARN Act as a "single employer."
- The class settled with the ClearEdge estates; the bankruptcy court approved the settlement and closed the case. The settlement released claims against ClearEdge and many affiliates but expressly excluded claims against third parties "including, but not limited to Kohlberg Ventures LLC."
- Wojciechowski later sued Kohlberg Ventures in district court alleging Kohlberg was a "single employer" with ClearEdge and liable under the WARN Act for unpaid wages/benefits (seeking amounts minus payments from the ClearEdge settlement).
- Kohlberg moved to dismiss based on claim preclusion (res judicata), arguing the prior settled adversary proceeding barred the later suit. The district court granted dismissal; Wojciechowski appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether claim preclusion bars Wojciechowski's WARN Act claim against Kohlberg | Wojciechowski argued the prior settlement expressly preserved claims against Kohlberg, so preclusion doesn't apply | Kohlberg argued the earlier judgment/settlement in the bankruptcy proceeding precludes splitting the claim and binds nonparties like Kohlberg | Reversed: preclusion does not bar the claim because the settlement unambiguously reserved claims against Kohlberg and the settling parties did not intend preclusion to extend to Kohlberg |
| Whether the preclusive effect of a settlement is measured by general claim-preclusion rules or the settling parties' intent | Wojciechowski contended intent of settling parties (as reflected in agreement) controls preclusive scope | Kohlberg urged treating the dismissal with prejudice as barring subsequent suits regardless of reservation language | Held: The preclusive effect of a consent judgment is determined by the settling parties' intent as shown by the settlement agreement; plain reservation controls |
| Whether Kohlberg must have been a party or consented to the settlement for the reservation to protect later claims | Wojciechowski asserted Kohlberg need not have been a party; the court-approved settlement’s terms govern preclusion | Kohlberg contended nonparty status prevents reliance on the reservation and bars later suit | Held: Nonparty status does not negate the parties' intent; court approval gives the settlement preclusive effect only to the extent the parties intended, so Kohlberg’s nonconsent is immaterial |
| Whether courts may give a settlement greater preclusive effect than the parties intended | Wojciechowski argued courts must not expand preclusion beyond the agreement’s plain terms | Kohlberg argued for broader preclusive effect that would bar the later claim | Held: Courts cannot expand preclusion beyond the settling parties’ intent; the settlement cannot be given greater preclusive effect than its terms show |
Key Cases Cited
- Taylor v. Sturgell, 553 U.S. 880 (2008) (explains purposes of claim and issue preclusion and use of terms)
- Montana v. United States, 440 U.S. 147 (1979) (discusses protection against relitigation and inconsistent decisions)
- Mpoyo v. Litton Electro-Optical Sys., 430 F.3d 985 (9th Cir. 2005) (defines claim preclusion elements)
- Norfolk S. Corp. v. Chevron, U.S.A., Inc., 371 F.3d 1285 (11th Cir. 2004) (consent judgments derive force from parties’ consent; settlement limits preclusive effect)
- Purdue Pharma L.P. v. U.S. ex rel. May, 737 F.3d 908 (4th Cir. 2013) (preclusive effect of settlements measured by parties’ intent; settlement cannot have greater preclusive effect than agreement)
- Klamath Water Users Protective Ass’n v. Patterson, 204 F.3d 1206 (9th Cir. 1999) (contract terms given ordinary meaning; clear terms control parties’ intent)
- F.T.C. v. Garvey, 383 F.3d 891 (9th Cir. 2004) (consent-judgment preclusive effects should be measured by parties’ intent)