Smith & Wesson Brands Inc v. Attorney General New JerseySmith & Wesson Brands Inc v. Attorney General New Jersey
CHAGARES, Chief Judge.
This is an appeal challenging a New Jersey Attorney General subpoena in spite of a state court judgment enforcing the subpoena and rejecting the same claims pursued, but not yet resolved, in federal court. The Office of the Attorney General of New Jersey (“New Jersey Attorney General”) issued a subpoena for the production of documents to Smith & Wesson Brands, Inc., Smith & Wesson Sales Company, and Smith & Wesson Inc. (collectively, “Smith & Wesson”) pursuant to its authority under the New Jersey Consumer Fraud Act,
I.
This is not the first time this Court has considered an appeal arising from the New Jersey Attorney General’s efforts to enforce the subpoena. See Smith & Wesson Brands, Inc. v. Att’y Gen. of N.J., 27 F.4th 886 (3d Cir. 2022). Although most of the facts are the same, state and federal courts have conducted additional proceedings, so we recount the relevant background in full.
The New Jersey Attorney General is investigating firearms designer and manufacturer Smith & Wesson for possible violations of the New Jersey Consumer Fraud Act. See
In October 2020, the New Jersey Attorney General issued a subpoena seeking documents from Smith & Wesson pursuant to its authority under the Act. The subpoena is part of the state’s investigation into “whether [Smith & Wesson] had violated the [Consumer Fraud Act] by making any misstatements and/or knowing omissions to its consumers about the safety, benefits, effectiveness, and legality of its products.” N.J. Att’y Gen. Br. 5. The New Jersey Attorney General requested copies of all advertisements for Smith & Wessоn merchandise available in New Jersey concerning home safety and defense, concealed carry, personal protection and defense, as well as documents concerning the legality, safety, benefits, and effectiveness of concealed carry in New Jersey, among others.
Instead of complying with the subpoena and producing the requested documents, Smith & Wesson sent a letter to the New Jersey Attorney General objecting in December 2020. It wrote that the subpoena violated the First, Second, Fourth, Fifth, and Fourteenth Amendments, the Dormant Commerce Clause, the federal Protection of Lawful Commerce in Arms Act, and various evidentiary privileges, among other objections. The next day, Smith & Wesson filed a complaint in the United States District Court for the District of New
The state trial court issued its judgment first and rejected Smith & Wesson’s arguments. In June 2021, the state trial court denied Smith & Wesson’s cross-motion and ordered the company to produce the subpoenaed documents within thirty days. Smith & Wesson sought an emergency stay of production, but the New Jersey Superior Court, Appellate Division (the “Appellate Division”) and New Jersey Supreme Court denied it. Smith & Wesson also filed a formal notice of appeal.
The District Court then twice dismissed Smith & Wesson’s complaint. The District Court first dismissed Smith & Wesson’s complaint, abstaining under Younger, but this Court vacated that order and remanded for further proceedings.
While the present appeal was pending, the Appellate Division affirmed the state trial court’s order in January 2023. The Appellate Division rejected Smith & Wesson’s contention that it may raise its constitutional challenges to the subpoena.
II.
The District Court had jurisdiction under
Smith & Wesson argues that the District Court erred in dismissing its complaint for two primary reasons. First, it argues the District Court incorrectly conducted its claim preclusion analysis. It contends that the state trial court order does not have preclusive effect because the state trial court’s judgment does not satisfy the claim preclusion test and because the New Jersey Appellate Division’s opinion was not on the merits. Second, Smith & Wesson contends the District Court incorrectly rejected its reservation of its rights tо litigate in federal court.
A.
We first determine whether the District Court correctly afforded preclusive effect to the state trial court order. The Full Faith and Credit statute provides that “judicial proceedings of any court of any such State . . . . shall have the same full faith and credit in every court within the United States . . . as they have by law or usage in the courts of such State . . . from which they are taken.”
Claim preclusion “insulat[es] courts from the relitigation of claims.” Watkins v. Resorts Int’l Hotel & Casino, Inc., 591 A.2d 592, 597 (N.J. 1991). This doctrine “provides that a cause of action between parties that has been finally determined on the merits by a tribunal having jurisdiction cannot be relitigated by those parties or their privies in a new proceeding.” Velasquez v. Franz, 589 A.2d 143, 147 (N.J. 1991) (citing Roberts v. Goldner, 397 A.2d 1090, 1091 (N.J. 1979)); see also Wadeer v. N.J. Mfrs. Ins. Co., 110 A.3d 19, 27-28 (N.J. 2015). Claim preclusion serves the purposes of “finality and repose,” the “prevention of needless litigation,” the “reduction of unnecessary burdens of time and expenses,” the “elimination of conflicts, confusion and uncertainty,” and “basic fairness.” Wadeer, 110 A.3d at 27-28 (quotation marks omitted) (quoting First Union Nat’l Bank v. Penn Salem Marina, Inc., 921 A.2d 417, 423 (N.J. 2007)).
Under New Jersey law, claim preclusion requires that
(1) the judgment in the prior action must be valid, final, and on the merits; (2) the parties in the later action must be identical to or in privity with those in the prior action; and (3) the claim in the later action must grow out of the same transaction or occurrence as the claim in the earlier one.
McNeil v. Legis. Apportionment Comm’n, 828 A.2d 840, 859 (N.J. 2003) (quoting Watkins, 591 A.2d at 599); see also Velasquez, 589 A.2d at 147 (writing that claim preclusion
1.
As to the first elеment of the claim preclusion test, the state trial court issued a final order when it denied Smith & Wesson’s cross-motion and ordered the company to comply with the New Jersey Attorney General’s subpoena. Smith & Wesson appealed this final order to the New Jersey Appellate Division, which affirmed the state trial court’s order. Neither party argues the state trial court’s order was not a valid, final judgment on the merits when issued.
But Smith & Wesson now contends there was, in fact, no judgment on the merits because of what occurred in the state appeal.4 The company argues the Appellate Division declined
Smith & Wesson, however, misconstrues the Appellate Division’s opinion, which discussed ripeness only in the alternative. The Appellate Division expressly considered the merits of Smith & Wesson’s constitutional arguments and rejected them for the same reasons as the state trial court. App. 597 (“We find Judge Alper did not err in her narrow reading of NAACP, and our analysis leads us to the same outcome.”); App. 598 (“We disagree, as those theories are premised upon the argument that the United States Supreme Court’s holding in NAACP permits them. We have already rejected that argument.”). In the state trial and appellate courts, Smith & Wesson argued that the Supreme Court’s decision in NAACP v. Alabama ex rel. Patterson, 357 U.S. 449 (1958), “stands for the proposition ‘that the indispensable liberties of the First Amendment, whether of speech, press, or association, cannot be abridged by the government unless the state articulates comрelling interests.’” App. 593 (quotation marks omitted). The Appellate Division held that it was “not persuaded,” id., because it interpreted NAACP and earlier United States Supreme Court decisions to permit constitutional challenges to state subpoenas only for violations of the freedom of association under the First Amendment. App. 593-97. It determined that NAACP does not “permit[]” the company’s “constitutional claims,” and rejected the defenses outright.
Smith & Wesson’s tendentious reading of the opinion would have us hold that the Appellate Division rested solely on ripeness and never considered the merits of the company’s constitutional defenses. It did consider and discuss them. See App. 597-98; see also App. 593-97. And it rejected them. In the alternative, it rejected them for an independently sufficient reason. We decline to construe the Appellate Division’s categorical affirmance as undoing the preclusive effect of the appealed judgment. There was a valid, final judgment on the merits, and the Appellate Division’s affirmance did not alter this.
2.
The second element of the claim preclusion test is also met. Both Smith & Wesson and the New Jersey Attorney General are the same parties in both actions. Smith & Wesson filed its federal complaint against the New Jersey Attorney General. A few months later, the New Jersey Attorney General
3.
The third element is satisfied, as well. Smith & Wesson argues that the state court judgment cannot be preclusive because the state and federal proceedings concerned distinct claims. For two claims to grow out of the same occurrence, the claims must involve “substantially similar or identical causes of action and issues, parties, and relief sought.” Wadeer, 110 A.3d at 28 (quoting Culver v. Ins. Co. of N. Am., 559 A.2d 400, 405 (N.J. 1989)). To decide if two causes of action are the same, courts must determine
(1) whether the acts complained of and the demand for relief are the same (that is, whether the wrong for which redress is sought is the same in both actions); (2) whether the theory of recovery is the same; (3) whether the witnesses and documents necessary at trial are the same (that is, whether the same evidence necessary to maintain the second action would have been sufficient to support the first); and (4) whether the material facts alleged are the same.
Id. The New Jersey Supreme Court has observed that this element is “the most difficult to determine” for a claim preclusion analysis. Id.
The demand for relief in both actions is also essentially the same. Smith & Wesson sought to prevent the enforcement of the New Jersey Attorney General’s subpoena in both actions. In its federal complaint, Smith & Wesson asked the District Court to “[e]njoin аny proceedings in the state courts of New Jersey to enforce the Subpoena” and “[e]njoin Defendants from enforcing the Subpoena.” App. 82. In its state court cross-motion, the company also took issue with the
Smith & Wesson’s inclusion of requests for declaratory relief and a stop to the New Jersey Attorney General’s “investigation” in its federal complaint changes nothing. App. 82-83. The gravamen of both actions is the same. In the federal proceeding, Smith & Wesson sought to stop subpoena enforcement on the grounds that it is illegal. In the state proceeding, Smith & Wesson sought to quash the subpoena and stop enforcement because it is illegal. The specific forms of relief sought are immaterial so long as Smith & Wesson had the opportunity to seek identical relief — relief preventing enforcement of the subpoena — in both actions. It had that opportunity and did exactly that.8 See First Union Nat’l Bank, 921 A.2d at 424 (applying claim preclusion test and holding that the claims were the same “[a]lthough the demand for relief [was] broader in the [subsequent action]” because it included a new demand for equitable relief); Culver, 559 A.2d at 405 (holding the relief sought was “essentially the same, even though in the second action the claim for damages is expanded to include” other forms of relief); see also Gregory v. Chehi, 843 F.2d 111, 118 (3d Cir. 1988) (“It is not significant that the
The evidence and material facts are similarly identical across both actions. If “additional proofs neither required nor relevant” to the first proceeding are required in the second proceeding, then the matters may be distinct. See Bondi v. Citigroup, Inc., 32 A.3d 1158, 1188 (N.J. Super. Ct. App. Div. 2011). In both the federal complaint and state cross-motion, Smith & Wesson alleges violations of the same constitutional provisions because of the New Jersey Attorney General‘s subpoena. Compare App. 72-82 (federal complaint) with App. 190-98 (state cross-motion). The evidence required to demonstrate that the state violated Smith & Wesson‘s federal rights is the same whether litigated in federal or state court. And the material facts are the same. Smith & Wesson‘s legal challenges in both proceedings stem from the New Jersey Attorney General‘s efforts to enforce the subpoena against it. See Wadeer, 110 A.3d at 29; Culver, 559 A.2d at 405.
Both [proceedings] involve the same claims: the enforceability of the Subpoena and the validity of Smith & Wesson‘s constitutional objections to that Subpoena. While one case presents the issues in the context of an action for deprivation of rights and the other in the context of a motion to enforce, it is a distinction without a difference. The issue is the same: whether Smith & Wesson must comply with the Subpoena.
App. 189 (emphasis added). The company went so far as to incorporate its federal complaint by reference in its state trial court filing. See App. 190 n.17; see also App. 194-96 (explicitly referring to its federal complaint in its state trial court filing). Smith & Wesson cannot have it both ways. It argued the claims are the same for the purposes of a stay, but now attempts to frame them as distinct for the purposes of preclusion. Moreover, other courts have similarly looked to the party‘s own characterization of its actions in concluding two acts complained of were the same. See Exxon, 28 F.4th at 401 (relying upon Exxon‘s concession in Massachusetts trial court that all its claims in both actions arose from the same facts).
Although we hold that New Jersey‘s claim preclusion test is satisfied, Smith & Wesson raises additional arguments for why its federal complaint should not be precluded.
a.
Smith & Wesson argues that the state court judgment cannot be preclusive because the company did not have the full and fair opportunity to litigate its constitutional arguments in the state court proceeding. Although the full and fair opportunity to litigate is typically discussed in issue preclusion analyses and is not expressly part of the New Jersey claim preclusion test, the Supreme Court has held that “invocation of res judicata or claim preclusion is subject to the same limitation.” Kremer v. Chem. Constr. Corp., 456 U.S. 461, 481 n.22 (1982); see also 18 Charles Alan Wright, Arthur R. Miller, Edward H. Cоoper, and Vikram David Amar, Federal Practice and Procedure § 4423 (3d ed. 2016) [hereinafter Wright & Miller] (discussing the full and fair opportunity to litigate as necessary for issue preclusion). New Jersey appellate courts have similarly held that claim preclusion does not apply unless the party whose claim is being sought to be barred had a full and fair opportunity to litigate its claims in the original action. See Bondi, 32 A.3d at 1188 (citing Cafferata v. Peyser, 597 A.2d 1101, 1104 (N.J. Super. Ct. App. Div. 1991)).
New Jersey appellate courts have listed factors to consider when determining whether a party had a full and fair opportunity to litigate. Courts should consider whether “(1) the prior forum afforded plaintiffs procedural opportunities in
Smith & Wesson had a full and fair opportunity to litigate its claims in state court. The company contends that the summary state court enforcement action lacked the procedural opportunities of plenary proceedings, and therefore cannot have preclusive effect. Summary actions are, “by definition, designed to accomplish the salutary purpose of swiftly and efficiently disposing of matters which lend themselves to summary treatment[.]” Levchuk v. Jovich, 855 A.2d 635, 640 (N.J. Super. Ct. App. Div. 2004) (quotation marks omitted) (alteration in original). Smith & Wesson correctly notes that the New Jersey courts do not seek to make summary proceedings “traps[s] for the unwary,” id. at 641 (quoting Perry v. Tuzzio, 672 A.2d 213, 217 (N.J. Super. Ct. App. Div. 1996)), or “the unsuspecting,” Cafferata, 597 A.2d at 1104, by creating preclusive consequences beyond the proceeding‘s scope. That is why, in a summary proceeding, “no counterclaim or cross-claim may be asserted without leave of court.” Levchuk, 855 A.2d at 640 (citing
But the authority Smith & Wesson cites concerned circumstances critically distinct from its own state court summary proceeding. The company relies heavily upon two New Jersey appellate cases where the Appellate Division did not afford preclusive effect to a summary proceeding. See
Cafferata and B.F. both concerned situations where the plaintiffs had no or limited legal representation and possessed no procedural mechanism to present their claims. In stark contrast, a sophisticated national law firm represented Smith &
One of our sister Courts of Appeals recently came to a similar conclusion in an analogous case. In Exxon Mobil Corp. v. Healey, the Massachusetts Attorney General initiated an investigation into whether energy company Exxon Mobil committed consumer fraud. 28 F.4th at 388. The Massachusetts Attorney General served Exxon with a subpoena to produce documents concerning marketing and sales of fossil fuel products to Massachusetts residents. Id. at 389. Exxon then filed a federal complaint for civil rights violations against the Massachusetts Attorney General, seeking to enjoin the subpoena because the investigation violated the
b.
Smith & Wesson also argues that a recent change in Second Amendment jurisprudence “requires a new determination on the merits.” Smith & Wesson Br. 40. The Supreme Court issued its decision in New York State Rifle & Pistol Ass‘n v. Bruen, 597 U.S. 1 (2022), in June 2022, almost exactly one year after the state trial court ordered Smith & Wesson to comply with the subpoena. In Bruen, the Supreme Court discarded the means-ends scrutiny test courts had applied to challenges to firearm regulations. Bruen, 597 U.S. at 17; see also Range v. Att‘y Gen., 69 F.4th 96, 100 (3d Cir. 2023) (en banc). It instead held that “the government must demonstrate that the regulation is consistent with this Nation‘s historical tradition of firearm regulation.” Bruen, 597 U.S. at 17. Smith & Wesson argues Bruen alters the preclusion analysis.
We are not convinced of the relevance of Bruen to the claim preclusion analysis here. There is no firearm regulation at issue in this appeal, and no court engaged in any Second Amendment analysis that would have been conducted differently pursuant to Bruen. Even assuming Bruen is relevant, Smith & Wesson cites no authority establishing that a subsequent change of law creates an applicable exception to
All elements of New Jersey‘s claim preclusion test are satisfied and Smith & Wesson‘s other arguments are without merit. Therefore, we agree with the District Court that Smith & Wesson‘s federal claims are barred by claim preclusion.
B.
We turn to Smith & Wesson‘s other argument that the District Court incorrectly rejected its reservation of its right to litigate in its chosen, federal forum.
In Railroad Commission of Texas v. Pullman, the Supreme Court recognized the first abstention doctrine. 312 U.S. 496, 501 (1941). The Supreme Court held that “[i]f there are unsettled questions of state law in a case that may make it unnecessary to decide a federal constitutional question, the federal court should abstain until the state court has resolved the state questions.” 17A Wright & Miller § 4241 (discussing Pullman, 312 U.S. at 501-02). But when a federal court invokes Pullman abstention and stays proceedings to allow the state courts to decide the preliminary and essential question of state law, the litigants run the risk that the state court may reach beyond the state law issue and decide the litigants’ federal constitutional questions. See England v. La. State Bd. of Med. Exam‘rs, 375 U.S. 411, 413-14, 419 (1964). To address this problem, the Supreme Court held that “when a federal court abstains from deciding a federal constitutional issue to enable
But England reservation only applies to instances that resemble Pullman abstention. In San Remo Hotel, the Supreme Court clarified the scope of England reservation and explained that
[o]ur discussion of the “typical case” in which reservations of federal issues are appropriate makes clear that our holding was limited to cases that are fundamentally distinct from petitioners‘. “Typical” England cases generally involve federal constitutional challenges to a state statute that can be avoided if a state court construes that statute in a particular manner. In such cases, the purpose of abstention is not to afford state courts an opportunity to adjudicate an issue that is functionally identical to the federal question. To the contrary, the purpose of Pullman abstention in such cases is to avoid resolving the federal question by encouraging a state-law determination that may moot the federal controversy. Additionally, our opinion made it perfectly clear that the effective reservation of a federal claim was dependent on the condition that plaintiffs take no action to broaden the scope
of the state court‘s review beyond decision of the antecedent state-law issue.
545 U.S. at 339-40 (citations and footnotes omitted). Some of our sister Courts of Appeals have interpreted San Remo Hotel to explicitly limit England reservation only to situations where a district court abstains under Pullman. See Davison v. Rose, 19 F.4th 626, 634 (4th Cir. 2021) (“[A]n England reservation only applies after a federal court abstains under Pullman.“); Atwater v. Chester, 730 F.3d 58, 63 (1st Cir. 2013) (“The right to reserve claims arises only when the district court abstains under Pullman.“). In a decision that precedes San Remo Hotel, however, we recognized that “the Supreme Court has never explicitly limited England to the Pullman abstention context.” Bradley v. Pittsburgh Bd. of Educ., 913 F.2d 1064, 1071 (3d Cir. 1990).
We need not decide whether England reservation only applies to instances of Pullman abstention at this time. Even if England reservation applies in a broader array of circumstances than just Pullman abstention, it must at least resemble a “typical case” permitting England reservation. San Remo Hotel, 545 U.S. at 339. It does not here. “Typical England cases generally involve federal constitutional challenges to a state statute that can be avoided if a state court construes the statute in a particular manner.” Id. Smith & Wesson does not challenge the constitutionality of any state statute. The parties do not identify any issues of statutory construction in this case. Moreover, Smith & Wesson did “take [an] action to broaden the scope of the state court‘s review beyond” the state law issue by raising its federal constitutional challenges in its cross-motion. Id. at 340. Therefore, England reservation is unavailable, and the District
IV.
The District Court properly found that claim preclusion barred Smith & Wesson‘s claims in federal court. When these issues arise across the federal system, federal courts must honor and give full faith and credit to the competent adjudication of state courts. After all, comity between state and federal courts is the “bulwark of the federal system.” Allen v. McCurry, 449 U.S. 90, 96 (1980). To permit litigants to frustrate an unfavorable state court ruling by pursuing a carbon-copy lawsuit in federal court seeking substantially the same relief undermines our judicial system. Litigants get one opportunity to make their arguments. Not two. And they cannot file a federal lawsuit to hedge against a potentially unfavorable state ruling.
We note that the operation of claim preclusion is quite modest in this case. The District Court correctly precluded Smith & Wesson‘s constitutional claims against the New Jersey Attorney General for its efforts to enforce its subpoena because these claims already had been decided in New Jersey state court. The preclusive effect of the state court judgment only concerns the subpoena at issue — not any nascent and further investigative step or future enforcement action. The New Jersey Attorney General conceded as much. See Oral Arg. at 20:13-21:25. We express no opinion on whether Smith & Wesson‘s claims for constitutional violations due to further investigative steps would be precluded.
More than three years ago, Smith & Wesson asked a federal court to decide whether the novel decision by New Jersey‘s Attorney General to use a state consumer fraud law to investigate ads for ordinary guns and ammo treads on the freedoms recognized by the U.S. Constitution. Today, and four opinions later, those questions remain unanswered. In round one, New Jersey raised the flag of Rooker-Feldman1 to avoid the merits, an argument we rejected in round two. Remand brought round three and should have resulted in a review of the claims raised and relief sought. Ever eager, it seems, to avoid that sort of scrutiny, New Jersey‘s Attorney General reached for res judicata. It worked, and the District Court dismissed the entire controversy,2 a decision the majority affirms today in the
Respectfully, this roundabout approach departs from the classical contours of preclusion because there has never been a final decision on the merits of Smith & Wesson‘s claims. Not in the federal courts, nor in the state actions—a point helpfully confirmed by the Appellate Division of the New Jersey Superior Court, which took pains to point out that it was passing on, not deciding, the legal questions presented.
At bottom, New Jersey has not carried its burden of proving that res judicata applies. It has not successfully shown that the Chancery Division and the Appellate Division decisions were final and disposed of Smith & Wesson‘s federal claims on the merits. Smith & Wesson, like any litigant, is entitled to an answer to the allegations in its federal complaint. And “[t]he ease and efficiency of res judicata as a means of quickly avoiding an evaluation of the merits of a plaintiff‘s claim does not imply that the decision to apply the doctrine should be either facile or hasty.” Purter v. Heckler, 771 F.2d 682, 690 (3d Cir. 1985). I would reverse the decision of the District Court and so respectfully dissent.3
Res judicata expresses the classical principle of finality that when a claim is decided on the merits, it cannot be relitigated in another suit between the same parties raising the same facts. As explained by the first Justice John Marshall Harlan: “The general principle announced in numerous cases is that a right, question, or fact distinctly put in issue, and directly determined by a court of competent jurisdiction, as a ground of recovery, cannot be disputed in a subsequent suit between the same parties or their privies.” S. Pac. R.R. Co. v. United States, 168 U.S. 1, 48 (1897). The correlative principle, fixing the doctrine‘s limited nature, is that preclusion requires “sameness“—a mere overlap of claims or controversies will not do. And claim preclusion “does not apply where ‘[t]he plaintiff was unable to rely on a certain theory of the case or to seek a certain remedy,‘” a limit that “protects a plaintiff‘s right to bring claims that he ‘was not at liberty to assert’ in a prior forum of limited jurisdiction.” Beasley v. Howard, 14 F.4th 226, 232 (3d Cir. 2021) (quoting Marrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373, 382 (1985) (alteration in original), Est. of Roman v. City of Newark, 914 F.3d 789, 805 (3d Cir. 2019)).
Preclusion followed settlers to thе courts in the English colonies in North America9 and, after Independence, became a
Today, just like federal common law, res judicata in New Jersey balances efficiency with fairness, ensuring that parties are not barred from bringing claims that a prior court never ruled on and could not have ruled on. See Watkins v. Resorts Int‘l Hotel & Casino, Inc., 591 A.2d 592, 599 (N.J. 1991) (citing Restatement (Second) of Judgments §§ 25 cmt. e, 26(1)(c) (Am. L. Inst. 1982)). And whether we look to the classical or modern version of claim preclusion, Smith & Wesson‘s complaint is not barred.
II.
Under both New Jersey and federal law, claim preclusion is an affirmative defense. See
A.
New Jersey first fails to establish a valid and final judgment on the merits where “the factual issues directly involved . . . [were] actually litigated and determined.” Adelman v. BSI Fin. Servs., Inc., 179 A.3d 431, 436 (N.J. Super. Ct. App. Div. 2018) (quoting Slowinski v. Valley Nat‘l Bank, 624 A.2d 85, 91 (N.J. Super. Ct. App. Div. 1993)); see also Velasquez v. Franz, 589 A.2d 143, 147 (N.J. 1991). To preclude Smith & Wesson‘s federal suit, New Jersey relies on two judgments: one from the Superior Court, Chancery Division and another from the Superior Court, Appellate
1.
“[B]efore assessing the effect of [a] judgment, [we must] consider what [the court] actually decided.” Davis v. U.S. Steel Supply, Div. of U.S. Steel Corp., 688 F.2d 166, 182 (3d Cir. 1982) (en banc) (Gibbons, J., dissenting). The Chancery Division did not render a decision on Smith & Wesson‘s federal claims that can establish res judicata because it simply did not consider, much less decide, most of them.
The Chancery Division decision has two parts.14 In the first, the Chancery Division addressed Smith & Wesson‘s request to stay the subpoena‘s enforcement pending resolution of its constitutional claims in federal court. As the Chancery Division explained, Smith & Wesson “argue[d] that NAACP v. Alabama requires that all constitutional issues related to a subpoena be resolved before it can be enforced.” App. 283 (citing 357 U.S. 449, 463 (1958)) (emphasis added).15 The Chancery Division disagreed, explaining that NAACP involved “how Alabama‘s interest in obtaining an NAACP members list interfered with those members[‘] right to freely associate and pursue private interests as protected by the Fourteenth Amendment.” App. 283–84. Concluding that New Jersey‘s subpoena did not implicate Smith & Wesson‘s freedom of association, the Chancery Division saw no reason to stay the enforcement application. With that threshold concern resolved, the Chancery Division declined to discuss, let alone decide,
In sum, the Chancery Division decided that 1) enforcement of the subpoena need not be stayed pending resolution of Smith & Wesson‘s federal claims, and 2) the subpoena is a valid exercise of the Attorney General‘s authority under the Consumer Fraud Act and Hazardous
2.
But even if the Chancery Division‘s decision could be read to decide Smith & Wesson‘s federal claims, the Appellate Division‘s decision controls and confirms preclusion is improper.19 It is black-letter res judicata law that when “an
So what did the Appellate Division decide? Not much, owing to the “the lens of strict necessity” it applied to Smith &
But the majority restarts the analysis the Appellate Division ended, writing that the Appellate Division rejected the “constitutional claims on the merits.” Majority Op. at 14. Respectfully, that is either wrong or only half right. The Appellate Division, expressly following the reasoning of the Chancery Division, held NAACP does not permit a wide range of federal constitutional objections to a statе subpoena, only those sounding in the freedom of association. App. 593 (“According to defendant, NAACP protects not only freedom of association, but also governmental trespass of ‘fundamental freedoms’ and ‘indispensable liberties.’ We are not persuaded.“). If the majority means the Appellate Division decided whether NAACP has a broad or narrow lens, then I agree, and that is the only claim eligible for preclusion. If, however, it means that the Appellate Division decided the other federal constitutional claims Smith & Wesson presents in the federal complaint, that fights the Appellate Division‘s own framing of the question.
The former reading is sounder. The Appellate Division did not read NAACP to permit Smith & Wesson to raise non-
In sum, the Appellate Division decided that: 1) it need not consider Smith & Wesson‘s arguments that the subpoena violates the Constitution before it considers the subpoena‘s validity; 2) even if it did consider the constitutional arguments,
B.
New Jersey has further failed to establish that Smith & Wesson‘s claims in state and federal court “grow out of the same transaction or occurrence.” McNeil, 828 A.2d at 859 (quoting Watkins, 591 A.2d at 599). “Causes of action are deemed part of a single ‘claim’ if they arise out of the same transaction or occurrence,” id., but “[t]he test for identity of a cause of action is the most difficult to determine,” Wadeer v. N.J. Mfrs. Ins. Co., 110 A.3d 19, 28 (N.J. 2015). Courts must consider “whether the acts complained of and the demand for relief are the same (that is, whether the wrong for which redress is sought is the same in both actions)“; “whether the theory of recovery is the same“; “whether the witnesses and documents necessary at trial are the same (that is, whether the same evidence necessary to maintain the second action would have been sufficient to support the first)“; and “whether the material facts alleged are the same.” Culver v. Ins. Co. of N. Am., 559 A.2d 400, 405 (N.J. 1989) (quoting United States v. Athlone Indus., Inc., 746 F.2d 977, 984 (3d Cir. 1984)). New Jersey‘s argument that Smith & Wesson‘s federal claims are precluded by the state action fails out of the gate, because “the acts complained of and the demand for relief” are not the same. Id. But not only are the demands for relief in the two actions
A comparison of the state and federal complaints reveals marked differences in the demands for relief in each forum. In its federal complaint, Smith & Wesson brought claims pursuant to
Enjoin any proceedings in the state courts of New Jersey to enforce the Subpoena;
Enjoin Defendants from enforcing the Subpoena;
Issue a declaratory judgment pursuant to
28 U.S.C. § 2201 , declaring that the Subpoena and related investigation violate Smith & Wesson‘s rights under the First, Second, Fourth, Fifth, and Fourteenth Amendments to the United States Constitution;Issue a declaratory judgment pursuant to
28 U.S.C. § 2201 , declaring that the Subpoena and related investigation violate New Jersey citizens’ rights under the Secоnd Amendment to the United States Constitution;
Issue a declaratory judgment pursuant to 28 U.S.C. § 2201 , declaring that the Subpoena and related investigation are preempted by the Protection of Lawful Commerce in Arms Act;Issue a declaratory judgment pursuant to
28 U.S.C. § 2201 , declaring that the Subpoena and related investigation violate the Dormant Commerce Clause and the Supremacy Clause of the United States Constitution; [and]Award Plaintiffs such costs and reasonable attorney‘s fees to which it might be entitled by law[.]
App. 82.26
By contrast, New Jersey‘s order to show cause application in the Chancery Division only asked the court to
enter an Order [a]djudging [Smith & Wesson] in contempt of Court for failing or refusing to obey the Subpoena; [r]estraining [Smith & Wesson] from engaging in the advertisement, offering for sale, or sale of any merchandise until it fully responds to the Subpoena; [d]irecting [Smith & Wesson] to respond fully to the Subpoena within ten (10) days; [and] [e]njoining the destruction of any documents specifically requested in the Subpoena.
It is an easily seen contrast between narrow and wide. The demand in the state action was either the enforcement or quashing of a single subpoena. Smith & Wesson‘s federal complaint requests relief not just from this particular subpoena, but the investigation as a whole. See App. 82 (requesting that the federal court declare “that the Subpoena and related investigation violate Smith & Wesson‘s rights“) (emphasis
To avoid the distinctions between the two actions, the majority paints with a broad brush and repeatedly finds that the two matters are “essentially the same.”29 Majority Op. at 18,
2.
Further undermining any argument that the two actions “grow out of the same transaction or occurrence“—Smith &
Recall what happened. New Jersey sent Smith & Wesson a subpoena, and Smith & Wesson filed written objections to complying with the demand for documents. The day after the subpoena return date, Smith & Wesson filed its complaint in federal court. Two months later, and without addressing any of Smith & Wesson‘s responses and objections to the subpoena, New Jersey moved to enforce the subpoena by instituting an order to show cause in the Chancery Division.
That order to show cause is not the equivalent of an ordinary civil action—it is a focused and specialized mechanism to “seek relief in aid of a litigant‘s rights to enforce a subpoena.” Subpoenas: Procedure for Enforcing a Subpoena (NJ) (Westlaw). It provides an “expedited method for a party to request an order from the court.” Provisional Remedies: Procedure for Obtaining a Preliminary Injunction (NJ) (Westlaw). There are a few types of orders to show cause, see 3 N.J. Prac., Civil Practice Forms § 11:1 (6th ed. updated
As permitted, New Jersey sought an order to show cause by a “complaint, verified by affidavit . . . presented to the court ex parte.”
And this already limited proceeding was narrowed further still by the statutory authority invoked by New Jersey to initiate it:
The federal complaint, of course, is where Smith & Wesson asked for more, because there was simply no mechanism for Smith & Wesson to meaningfully bring its claims before the Chancery Division in this procedural posture. And it is no answer to say Smith & Wesson could have sought leave of court to assert counterclaims, any more than noting New Jersey could have filed a civil suit for declaratory relief beyond this subpoena. Claim preclusion deals with the claims
The structural limitations imposed by New Jersey law prevented Smith & Wesson from raising the claims contained in its federal complaint in the state action, so it cannot be that the causes of action and demands for relief are the same in both actions. Without the identity of causes of action and demands for relief, the state action and federal actions do not, in fact, “grow out of the same transaction or occurrence.” McNeil, 828 A.2d at 859. And for this reason, Smith & Wesson‘s federal claims are not precluded.37
Where does this leave the case? New Jersey tells us it welcomes Smith & Wesson to file another challenge to future enforcement actions, subpoenas, and investigations, but I am confident in predicting New Jersey will then argue those actions are precluded, too. For if Smith & Wesson‘s federal complaint cannot proceed now, then when can it, and on what grounds? Certainly Smith & Wesson cannot raise anything that has been precluded by this matter—which includes, it seems, every possible challenge to this first, but not last, application of the Consumer Fraud Act to supplement New Jersey‘s endless maze of firearms laws “in, as always, the name of ‘safety.‘” Smith & Wesson Brands, Inc. v. Att‘y Gen. of N.J., 27 F.4th 886, 896 (3d Cir. 2022) (Matey, J., concurring). Smith & Wesson is simply stuck on this now “well-traveled road in the Garden State, where long-dormant regulatory powers suddenly spring forth to address circumstances that have not changed.” Id. Intimidation, rather than litigation—where law must be offered, facts found, and an impartial decision reached—seems to be New Jersey‘s plan. A plan that,
And in its crusades, New Jersey follows the familiar playbook endorsed by this Court today, creating a “preclusion trap” by initiating an order to show cause in state court to quickly secure enforcement of a subpoena before a federal challenge can be heard, and then arguing that the summary proceeding results in a “permanent loss of [the] right to federal judicial review.” Id. at 2; Letter of Appellant at 1, First Choice Women‘s Res. Ctrs. Inc. v. Att‘y Gen. of N.J., No. 24-1111 (3d Cir. Feb. 6, 2024), ECF No. 18; see also Brief of Appellant at
New Jersey‘s Attorney General may cheer the result today. But the expansion of res judicata this win requires cannot be cabined to the chosen causes of the current executive. In time, New Jersey may come to lament losses in less tweet-worthy investigations. Such is the cost of departing from the classical legal tradition, and the reason I would stay firmly tethered to the law of preclusion, unedited. For that reason, I respectfully dissent.
Notes
At no point did Smith & Wesson argue the state trial court’s order failed to reach the merits. And by arguing that the Appellate Division decision “[r]emoves” the preclusive effect of the state trial court order, Reply Br. 2, 7, and the state trial court’s decision “should not preclude anything here anymore,” Oral Arg. at 2:31-2:51 (emphasis added), Smith & Wesson necessarily argues that the state trial court order was — before the issuance of the Appellate Division’s decision — on the merits.
Insofar that our dissenting colleague writes that Smith & Wesson did argue that the state trial court’s order was not a valid, final judgment on the merits, see Dissenting Op. 13 n.17, the company’s argument concerned only whether it received a full and fair opportunity to litigate in the state forum. We address this in a later part of the opinion. See infra Part III(A)(4)(a). See Digest from Emperor Justinian I‘s Corpus Juris Civilis, which was published in 534 A.D. Dig. 42.1.1 (Modestinus, Pandects 7) (“Things it is said to have been judged, which is the end of controversies by the pronouncement of the judge He accepts: that happens either by condemnation or by acquittal.“); Cary R. Alburn, Corpus Juris Civilis: A Historical Romance, 45 A.B.A. J. 562, 562 (1959). Roman law provided for a plea known as exceptio rei judicatae, available only when a subsequent suit involved the same parties and same legal claim. Zollie Steakley & Weldon U. Howell, Jr., Ruminations on Res Judicata, 28 Sw. L.J. 355, 355 (1974); Robert Wyness Millar, The Premises of the Judgment as Res Judicata in Continental and Anglo-American Law, 39 Mich. L. Rev. 1, 6 (1940). The Roman version of res judicata was motivated by finality, designed to protect litigants from never-ending suits. Lindsey D. Simon, Claim Preclusion and the Problem of Fictional Consent, 41 Cardozo L. Rev. 2561, 2569 (2020). As Ulpianus explained, “[w]here the origin of two claims is the same, it also makes a second demand the same.” See Dig. 44.2.7 (Ulpianus, On the Edict 75). But when “a new cause of action from which I derive ownership” arises, “I will not be barred . . . .” Id.
In its state appellate court briefing, Smith & Wesson argued that, in NAACP, “the Supreme Court spoke broadly about protecting all constitutional rights” guaranteed by the Constitution. App. 435. The company argued that all constitutional objections, not “only First Amendment freedom-of-association” concerns, App. 439, must be resolved as a threshold matter before ordering the production of documents. See App. 434-39. The New Jersey Attorney General disagreed, arguing that NAACP only permits specific challenges to subpoenas for First Amendment associational or privacy concerns. See App. 511-14. Smith & Wesson replied that neither “the trial court below nor the [New Jersey] Attorney General point to any support in NAACP that the Supreme Court intended to limit its holding to freedom of association cases only.” App. 547.
The parties disagreed about whether Smith & Wesson could raise its constitutional claims to a subpoena at all. When the Appellate Division wrote that it was not “persuaded that NAACP opened the door to constitutional defenses outside the freedom of association” and that the decision does not “permit[]” them, it resolved that disagreement. App. 598. The Appellate Division not only decided that NAACP has a “narrow lens,” Dissenting Op. 17, but also that as a result of this narrow lens, the subpoena does not implicate Smith & Wesson’s constitutional rights. Alburn, supra note 4, at 565.
Our dissenting colleague raises a number of the Russell decision’s limitations. Because the decision does predate Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938), it is not clear
This language comes directly from the New Jersey Supreme Court, which has precluded claims after holding “[t]he relief sought . . . is essentially the same,” Culver, 559 A.2d at 405; see also First Union Nat’l Bank, 921 A.2d at 424 (precluding claims after finding “the other elements of relief are essentially the same”). By the plain terms of its decisions, the New Jersey Supreme Court does not require exact sameness and has repeatedly afforded preclusive effect where there is a “high degree of similarity between the two actions,” First Union Nat’l Bank, 921 A.2d at 424, and where “the causes of action and essential issues” are “substantially the same,” Culver, 559 A.2d at 405. See also Wadeer, 110 A.3d at 28 (“Application of res judicata requires substantially similar or identical causes of action and issues, parties, and relief sought . . . .” (quotation marks omitted)); Betts v. Nichols, No. A-1378-21, 2023 WL 3990568, at *3 (N.J. Super Ct. App. Div. June 9, 2023) (per curiam) (affirming district court ruling that held “these claims are essentially the same as the claims made” before); Jefferson v. City & State Dep’t of Health & Vital Stat., No. A-1533-20, 2022 WL 2352137, at *3 (N.J. Super Ct. App. Div. June 30, 2022) (per curiam) (holding claims were precluded because they were “essentially the same claims” asserted in the first
But these are immaterial distinctions. First, as the Court of Appeals for the Second Circuit held, courts have expressly rejected “the notion that being in a ‘defensive’ posture would alter the analysis for claim preclusion.” Exxon, 28 F.4th at 401. In its state court briefing, Smith & Wesson seems to agree that the different posture has no effect, writing “[w]hile one case presents the issues in the context of an action for deprivation of rights and thе other in the context of a motion to enforce, it is a distinction without a difference.” App. 189 (emphasis added). Second, Massachusetts‘s claim preclusion test mirrors New Jersey‘s test. Exxon, 28 F.4th at 398. Moreover, Smith & Wesson cites no authority for its contention that the procedural posture or Massachusetts state law dictate a different outcome. See
Aside from any preservation issue, this exception is not applicable to this appeal. The present case is a far cry from the circumstances of City of Plainfield. There is no statute at issue here, let alone one that an application of preclusion would totally frustrate. And Smith & Wesson is a company pursuing its own corporate interest, not a quasi-public energy company sеrving the citizens of New Jersey. The New Jersey Supreme Court has cautioned that “[o]nly in extraordinary circumstances has the Court departed from strict deference to res judicata principles.” Velasquez, 589 A.2d at 151. We see no such extraordinary circumstance here and therefore will not do so now. We apply New Jersey law under
And New Jersey conceded during the order to show cause hearing that it understood it to be a “subpoena enforcement proceeding,” App. 224, meaning that “Smith & Wesson‘s Constitutional objections . . . cannot be adjudicated at this early subpoena enforcement stage,” App. 226 (emphasis added). Both parties agreed on this: Smith & Wesson described its federal complaint as “raising constitutional and federal statutory issues in an appropriate court.” App. 241 (emphasis added). And New Jersey did not dispute that characterization, telling the Chancery Division at one point that Smith & Wesson had “filed . . . their Constitutional claims as a complaint in federal court.” App. 267.
Given this, New Jersey only sought an “order directing Smith & Wesson to comply with the subpoena,” not an adjudication of Smith & Wesson‘s constitutional claims. App. 225. Smith & Wesson did not ask for an adjudication of its federal claims, either—telling the Chancery Division that the court “doesn‘t need to and shouldn‘t decide the Constitutional and Federal issues right now.” App. 238; see also App. 252 (Smith & Wesson telling the Chancery Division that “[i]n the first instance, it‘s our request that Your Honor stay in comity to the First Filed Action“) (emphasis added). Indeed, Smith & Wesson communicated to the Chancery Division the status of the federal proceeding, noting its complaint had been filed “two months before this one,” and that New Jersey “is actively participating in [the federal] action.” App. 239. Further, at the time of the order to show cause hearing, New Jersey had filed its first motion to dismiss in the federal action and briefing for that motion was almost finished.
In its brief before this Court, New Jersey cited a prior Third Circuit case that seems to take the opposite, and unsupported, view. Sеe Russell v. Russell, 134 F. 840 (3d Cir. 1905). But Russell arrived before Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938), did not apply New Jersey law, and has been regularly rejected in the last 118 years.
New Jersey courts agree. See Bondi, 32 A.3d at 1188 (“Res judicata does not apply unless ‘the party whose claim is being sought to be barred . . . had a fair and reasonable opportunity’ to fully litigate that claim in the first action.“) (quoting Cafferata v. Peyser, 597 A.2d 1101, 1104 (N.J. Super. Ct. App. Div. 1991)). A full and fair opportunity to litigate is also required to apply New Jersey‘s entire controversy doctrine, a “blood relative[]” of res judicata. Rycoline Prods., 109 F.3d at 886; see also Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., 203 A.3d 133, 148 (N.J. 2019) (rejecting application of entire controversy doctrine where the “prior forum did not afford a fair and reasonable opportunity to have fully litigated the . . . claim“) (internal citations and quotation marks omitted).
But as relevant here, the fact that Smith & Wesson faced a procedural bar to seeking the relief outlined in its federal complaint in state court undermines any argument that the demands for the relief are the same in both actions, and thus cannot “grow out of the same transaction or occurrence.” See Restatement (Second) of Judgments § 24 cmt. a (“Equating claim with transaction, however, is justified only when the parties have ample procedural means for fully developing the entire transaction in the one action going to the merits.“).
As to the first distinction, the majority‘s assertion that the quality of counsel bears on whether a claim is precluded misreads those cases. In Cafferata, the Appellate Division observed that the forum was designed be “informal[], mediation-type proceedings in which pro se litigants are able quickly, inexpensively, expeditiously, and with minimum resort to legal counsel” litigate their claims so that the forum cоuld “cope effectively with the volume of minor commercial litigation.” 597 A.2d at 1104. The Appellate Division found that proceedings in this “inequal[] . . . forum” “were never intended to have preclusionary consequences beyond their own scope.” Id. This discussion of representation then goes to the quality of the forum, not the ultimate presence or quality of representation. And in B.F., the Appellate Division expressly rejected the argument that being represented by “assigned, pro bono counsel,” rather than a privately retained attorney, was relevant to the application of res judicata. 686 A.2d at 1259.
Even so, for the reasons already articulated, the majority is incorrect that Smith & Wesson had a procedural mechanism to present their claims. See Majority Op. at 24–29. But more importantly, neither New Jersey nor the majority cite any authority from New Jersey in support of finding a claim precluded based on a prior summary proceeding. We must afford “the same” preclusive effect to the order to show cause summary proceeding that New Jersey courts would give, so the lack of authority here in support of the majority‘s position, and the disregarding of authority going the other way, in fact renders the preclusive effect “more.” Restatement (Second) of Judgments § 86 cmt. g. “If we honor the undoubted principle that courts need give a prior judgment no more force or effect that the issuing State gives it, the case before us is resolved.” Baker v. Gen. Motors Corp., 522 U.S. 222, 247 (1998) (Kennedy, J., concurring in the judgment). Exxon Mobil Corp. v. Healey, 28 F.4th 383 (2d Cir. 2022), cited by the majority and New Jersey, involved Massachusetts, not New Jersey law, and does not alter that conclusion.