481 F. 2d 501 - Stebbins v. Keystone Insurance Company J Stebbins

These are consolidated appeals1 in two separate actions brought by Emmett J. Stebbins, in which he alleged inter alia that the defendant insurance companies had refused to employ him on account of his race. Both claims were dismissed by the District Court, which relied on the res judicata effect of an earlier judgment that Stebbins was "so lacking in elementary financial prudence, candor, stability, meaningful interest in the business world, and definite career direction that no prudent insurance company could reasonably offer to employ him in a position of fiscal trust. . . ." Finding that, in the context of this litigation, the doctrine of collateral estoppel was improperly applied in both of these cases, we reverse.

In late 1969, Stebbins filed a class action (Civil Action No. 2848-69) against the Insurance Company of North America (INA),2 claiming racially discriminatory denial of job opportunities to himself and other blacks, in contravention of Title VII of the Civil Rights Act of 1964, 42 U.S.C. Secs. 2000e et seq., and section 16 of the Civil Rights Act of 1870, 42 U.S.C. Sec. 1981.3 He alleged that, as part of INA's discriminatory practices, the company had refused to employ him or provide him with information concerning the positions of Claims Examiner, Adjuster, Supervisor, Technical Representative, and Manager.

On a record consisting of a deposition of Stebbins taken by INA, exhibits introduced by INA during this deposition, and affidavits from the company's officers, INA moved for summary judgment on three separate grounds: First, since Stebbins did not allege that he had ever applied for employment, he could not claim there had been a refusal to hire him. Moreover, the exhibits showed that INA had responded directly to his requests for job specifications and had repeatedly asked him to complete an application form, which had been mailed to him.

Second, INA contended that the record demonstrated Stebbins was unemployable in any position of fiscal trust in the insurance industry.4

Third, it was claimed that Stebbins had no standing to represent a class of aggrieved persons unless he himself had been the subject of unlawful discrimination.

The Equal Employment Opportunities Commission (EEOC) appeared at a hearing on June 17, 1970, as amicus curiae in support of INA's motion for summary judgment. Its counsel stated in oral argument that, since Stebbins had never applied for a position, the record demonstrated no Title VII violation as to him. The Commission also agreed that Stebbins' deposition showed he was unqualified for employment as an insurance adjuster or in a supervisory capacity. Finally, the EEOC argued that the court should strike the class action claims-not because Stebbins had failed to prove discrimination against himself5-but because he was not a competent class representative as required by Rule 23(a)(4), Fed.R.Civ.P.

INA recognized the heavy burden it carried in seeking summary judgment on the broad ground of Stebbins' unemployability. It pointed out that Stebbins had not offered any counteraffidavits and had failed to respond to INA's statement of undisputed material facts. In short, Stebbins failed to contest any of the issues upon which INA sought judgment, and his only opposition was based on his stated desire to conduct extensive discovery proceedings against INA-without intimating what relationship this might bear to INA's proffered defenses.

At the conclusion of the June 17 hearing, the trial court orally advised Stebbins that the motion for summary judgment would be granted on the grounds that Stebbins had not applied for a job and was "not employable in the insurance industry." One June 30, 1970, the court issued a memorandum6 delineating the facts established by INA that were not in dispute. Based on these facts, the court concluded that the defendants had not engaged in unlawful employment practices under section 703(a)(1) of the Civil Rights Act of 1964, 42 U.S.C. Sec. 2000e-2(a)(1).7 Two separate grounds were cited for this conclusion: "by reason of the fact that plaintiff has refused to file an application for employment with INA," and because "plaintiff is so lacking in elementary financial prudence, candor, stability, meaningful interest in the business world and definite career direction that no prudent insurance company could reasonably employ him in a position of fiscal trust. . . ."8

Stebbins took no appeal from this judgment.

On July 8, 1970, Stebbins filed an independent action, which he styled "Complaint in the Nature of a Bill of Review," against INA and its subsidiaries, the EEOC, and certain of its officials (Civil Action No. 2036-70). He alleged that various improprieties had occurred in the earlier litigation, which vitiated its effect. In addition, he set forth a new claim, alleging that on June 18, 1970-one day after the trial judge had stated from the bench that summary judgment would be granted in the first INA suit-he had filed a formal employment application with INA and that the company had refused to hire him.

The District Court dismissed this action as to INA on November 9, 1970, relying on the res judicata effect of the June 30 judgment to bar Stebbins from relitigating the issue of his employability against the same defendants. Stebbins then filed a notice of appeal in forma pauperis, which the trial court denied as patently frivolous. Subsequently, when his claim against the EEOC was dismissed on January 5, 1971, Stebbins filed another notice of appeal and paid the filing fee on January 18.

This case has consistently been treated as a joint appeal against both INA and the EEOC. We pass by the motions ascribable to Stebbins' limited means,9 and examine the issues he has raised.B. The Keystone Litigation

On December 19, 1969, Stebbins filed suit against the Keystone Insurance Company (Keystone) and its affiliates (Civil Action No. 3588-69), also alleging violations of Title VII and 42 U.S.C. Sec. 1981. His complaint focused on two letters he had received from Keystone-in May of 1968 and in November of 1969 -refusing to employ him. This suit and Stebbins' first action against INA were pursued concurrently in different trial courts. Stebbins and Keystone cross-moved for summary judgment; and their motions were heard on July 1, 1970-the day after the memorandum was issued in the INA case.

The court ruled orally-and in writing on July 8, 1970-that Keystone's refusal to hire, based on the fact that Stebbins had engaged in litigation against the company, violated 42 U.S.C. Sec. 2000e-3(a); and Stebbins was granted partial summary judgment. But the remainder of Stebbins' complaint was dismissed on the ground that, as a predicate to claiming discrimination in hiring, the plaintiff must be qualified for the position he seeks. The court held that the issue of Stebbins' employability had been decided adversely in the first INA case and that Stebbins was therefore collaterally estopped to relitigate the matter against Keystone, citing Lober v. Moore, 135 U. S.App.D.C. 146, 417 F.2d 714 (1969). Finally, the court stated that "plaintiff's lack of qualifications deprive him of any right to claim damages under any aspect of the complaint."

Stebbins appeals from: (1) the ruling on collateral estoppel; (2) failure to award injunctive relief or punitive damages; and (3) failure to award counsel fees.

The central question, common to both appeals, is whether the judgment entered on June 30, 1970, in the first suit against INA bars Stebbins from relitigating the issue of his employability in the cases presently before us, his second action against INA, and his action against Keystone. Both of these cases relate to instances of discrimination distinct from that involved in the first INA suit. This question must be settled under principles not of res judicata,10 but of collateral estoppel, the doctrine that governs the impact of the disposition of one controversy upon a different cause between the same parties, and which had led to an extension of that doctrine, invoked by Keystone (as a different party), that sameness of issue suffices if the party seeking to relitigate has already lost it after full opportunity to make his maximum effort.11

Broadly speaking, collateral estoppel bars a party from contesting in a subsequent proceeding any issue of fact actually litigated in and determined by a previous final judgment rendered by a court of competent jurisdiction. The judgment is not conclusive, however, as to issues that might have been litigated and determined in the earlier action, but were not; nor as to any matter not essential to judgment in the prior adjudication.12

For years, the commentators have put it that, when a judgment is expressly rested on two (or more) independent grounds, any ground that is sufficient to sustain the result may be used as the basis for a claim of collateral estoppel in a subsequent litigation.13 But the text writers have stated this proposition as though it were self-evident and have not offered any persuasive supporting rationale. The handful of precedents customarily cited, none recent and the most of them readily distinguishable, likewise provide a mere mechanical recitation of the purported rule.14

In 1970, the rule was called into question, thoroughly re-examined, and rejected by the Second Circuit in Halpern v. Schwartz, 426 F.2d 102, the only case in the past 20 years to consider the question. The court squarely addressed the issue of whether a judgment expressly rested on three independent grounds gave rise to collateral estoppel on each of the grounds, or none of them. It concluded that, under the circumstances, no estoppel should be permitted. The court pointed out the inconsistency between the purported rule and the general principle limiting collateral estoppel to matters "essential to judgment."15 It distinguished the authorities cited in the texts; and it noted that, when the judgment rests on multiple grounds: (1) the court initially rendering judgment is less likely to have given full consideration to all the alternative bases when it appears that one of the grounds advanced is unassailable; and (2) there is no incentive to appeal when the losing party recognizes that one of the grounds is "solid," even if one or more of the alternative grounds is infirm.

Collateral estoppel has shown itself to be an extremely useful device for reducing the crush of litigation in the trial courts, and it goes a long way toward eliminating inconsistent decisions in cases with identical fact patterns and a common party. In part for these reasons, the recent trend has been to broaden the scope of its application.16 Halpern, of course, runs against this current. The Halpern rule was evolved in the context of a bankruptcy case. We need not decide whether the Halpern approach is sound if applied as a general rule to a wide range of matters. We are convinced that it is properly applied in the situation before us, where one of the grounds urged by the prevailing party, and accepted by the court, was the failure of the losing party to make an extra-judicial request or demand, or pursue a non-judicial remedy, prior to presenting his claim to the court. In Stebbins' initial suit for employment discrimination, brought on the ground that INA had refused to hire him because of his race,17 the District Court held that failure to plead and prove that he had sought employment with INA was fatal to his cause of action. The first INA judgment was not appealed; and we need not and do not consider on the merits the District Court's ruling that, as a matter of law, a Title VII plaintiff must file a formal employment application as a precondition to bringing suit. That ruling, right or wrong, was of no crucial significance to Stebbins-he could readily cure the defect found by the trial court, as he did, by filing an employment application with INA and beginning another action upon the denial of employment.

The settled rule that collateral estoppel applies only to matters that have been actually litigated,18 has plain justification: when the parties to a lawsuit actively contest an issue, the resulting judgment bears sufficient reliability to preclude subsequent inquiry; and re-litigation of the same issue would be wasteful of judicial resources. It is, however, standing that principle on its head to maintain, in effect, that a party must fully litigate each and every issue solely for the purpose of avoiding collateral estoppel. If the doctrine of collateral estoppel were applicable to this kind of case, it would compel extensive and unnecessary litigation in both the trial and the appellate courts. Though confronted with an easily remediable defense of failure to exhaust non-judicial remedies, a plaintiff would have to wage battle on the merits, both in the trial court with affidavits, proffers, discovery, motions, and trial if permitted, and in the appellate court. Here, INA's exhaustion defense was at least plausible-it was supported by EEOC. But in any event it was remediable. We can see no merit in a doctrine of collateral estoppel that would require Stebbins to appeal an adverse judgment and say, in effect: "May it please the court, since I can institute a new action merely by filing an employment application, it is immaterial to me whether the judgment is affirmed or reversed on this ground; but I have taken this appeal to make certain that the affirmance will not give rise to collateral estoppel on the alternate ground of unemployability."

In our view, the doctrine of collateral estoppel is not applicable where, as in this case, one ground of the judgment does not finally adjudicate the case on its merits but operates, much like a common law plea in abatement, to permit continued or further litigation upon an appropriate amendment or refiling, if relief continues to be withheld. In that event, a party may acquiesce in the judgment and take whatever steps are necessary to keep alive or rekindle his prayer for relief without being bound or estopped by any alternative ruling on the merits, and without being required to burden the appellate courts with an essentially futile appeal.

So stating, we do no more than to apply, with some difference in articulation and context, the approach laid down in Bland v. Connally, 110 U.S.App.D. C. 375, 293 F.2d 852 (1961),19 and Horner v. Ferron, 362 F.2d 224 (9th Cir.) cert. denied, 385 U.S. 958, 87 S.Ct. 397, 17 L.Ed.2d 305 (1966).20

The initial action Stebbins brought against INA alleged a policy of racially discriminatory hiring. Although this claim carries overtones of continuing injury, the cause of action itself arose from a specific instance in which INA had allegedly refused to hire Stebbins. The defense that Stebbins failed to prove he had applied for employment, was sufficient, in the view of INA, EEOC, and the trial court for a final judgment of dismissal as to the particular instance of alleged discrimination. It did not put to rest the underlying grievance that Stebbins complained of. It permitted a kind of intermediate disposition similar, in effect, to the dismissal in Bland for failure to exhaust administrative remedies, and in Horner for the failure to make the statutorily required demand for cure.21 Stebbins remedied this defect forthwith by filing the formal application and demand for employment. INA's refusal was like-wise prompt and unequivocal; and Stebbins thereupon filed his action anew. Technically, this was a new cause of action, rooted in a different instance of alleged discrimination. Its practical effect was merely to continue Stebbins' ongoing controversy with INA after a futile demand.

***

* * *

We are pleased to supplement our opinion by taking note of the subsequently-obtained Tentative Draft No. 1 of Chapter 3 of Restatement, Second, Judgments, approved not only by the Council of the American Law Institute, but also in principle by its membership, at a session held May 17, 1963, after the foregoing was set in type. The approach of the Tentative Draft on the exceptions to the rules of res judicata and issue preclusion is clearly supportive of both our approach and result in this case, though there may be divergences in our jurisprudence in other aspects of the problem.^21a

* * *

* * *B. Other Issues

***

* * *

We concur in the trial court's conclusion that the other issues raised by Stebbins in No. 71-1043 are without merit.

1. Stebbins' challenge to the EEOC's authority to appear as amicus curiae at the hearing on INA's motion to dismiss is frivolous. Section 705(h) of Title VII, 42 U.S.C. Sec. 2000e-4(g), specifically authorizes EEOC attorneys to represent the Commission as a party or as amicus curiae. This is in no wise undercut by the independent power to refer cases to the Attorney General under 42 U.S.C. Sec. 2000e-4(f)(6). EEOC did not exceed its authority in commenting, as it did on the legal consequences of the record before the District Court. It was not required to develop its own administrative record in order to proffer its expertise to the court as amicus curiae. The District Court properly dismissed Stebbins' claim that EEOC's counsel committed perjury in the District Court. The record is clear that counsel was appearing purely as an advocate presenting oral argument and was not offering testimony.

2. Matters relating to INA.

a. Stebbins' claim that INA committed fraud on the court, that INA had altered his deposition and had submitted fraudulent affidavits, was treated as a motion under Rule 60(b), Fed.R. Civ.P., for relief from judgment, and dismissed November 9, 1970, on the ground that Stebbins had consistently refused to specify what portions of these documents had been altered or falsified. We affirm. Stebbins had made similar claims of fraud, without particularity, in a motion to dismiss these documents; and he had been repeatedly instructed that his claims of fraud must be made specific. INA submitted affidavits that the documents in question had not been tampered with. It was within the discretion of the trial judge to dismiss claims of fraud consisting wholly of conclusory assertions without any supporting evidence.22

b. In the context of Stebbins' ongoing litigation with INA, the trial court correctly found that there was nothing unreasonable, unfair, or retaliatory about the letter of June 19, 1970, from INA's counsel, requesting that Stebbins conduct all further business with INA through its attorney. Nothing in this letter in any way inhibited Stebbins from seeking employment with or communicating with the defendant, so long as he proceeded through INA's counsel.

The judgments in both No. 24,65823 and No. 71-1043 are reversed and remanded for further proceedings not inconsistent with this opinion.

So ordered.

I concur in the result reached by the majority opinion, but on somewhat different grounds. I agree that the judgment of June 30, 1970, should not estop Stebbins from relitigating the issue of his employability in the course of pressing his claims of racial discrimination against members of the insurance industry. But that Stebbins appeared pro se in the first INA litigation is of crucial significance for me.

It is true that a person appearing on his own behalf is entitled to no special privileges or rights unavailable to parties represented by counsel.1 I am aware that Stebbins' litigious history and two years of legal training have caused courts in the past to rule against him on procedural and technical matters.2 The question of employability, however, is a matter of such importance that Stebbins' actual understanding of the consequences of the course of action he took must be considered.

It appears from the record in the INA litigation that Stebbins thought he had a right to proceed with discovery against INA before his case would be dismissed from court. Indeed, the interrogatories he wanted answered contained the core of his discrimination claim. Since discovery is usually the cornerstone of any successful discrimination complaint,3 Stebbins is not to be faulted for actively pursuing discovery.

It further appears that in failing to contest INA's motion for summary judgment, Stebbins was not engaging in a deliberate, willful or contemptuous attempt to frustrate the proceedings. Nor was he refusing to comply with an order of the court.4

Given these facts, I do not believe that Stebbins had any knowledge of the collateral consequences of the INA judgment. The actual foreseeability of these consequences is an important factor for this court to consider in deciding whether the effect of the INA judgment should be collaterally extended against him.5

Also, in the area of employment discrimination, these consequences are particularly severe. Stebbins is literally barred from pressing any of his claims in court. His suits have been dismissed in another Circuit, seemingly without any analysis of whether changed circumstances or the passage of time affected the applicability of the June 30th judgment.6

Stebbins is attempting to prove claims of an extremely sensitive nature against a number of large insurance companies. We must be especially cautious not to place unwarranted roadblocks in the way of discrimination litigation which is commonly brought by indigent or pro se members of minority groups.7

To avoid this problem, the trial court could have given Stebbins a minimal amount of information about the consequences of his failure to contest the motion for summary judgment. I do not think that it is the duty of the court to fully educate a litigant who continuously appears pro se,8 but neither is it fair or just for the court to ignore palpable ignorance in rendering a judgment with such drastic consequences.

SPOTTSWOOD W. ROBINSON, III, Circuit Judge (concurring):

I join in Judge Leventhal's opinion in toto but I believe Judge Bazelon also makes a strong point. It simply cannot be assumed that an ordinary pro se litigant is conversant with the intricacies of collateral estoppel or summary judgment. That is not to suggest that these wholesome doctrines are to be cast aside simply because the litigant is a layman. It is to say, however, that the presence of such a litigant may summon the court to the minor effort needed to make sure that they do not become traps for the legally unlearned.1

We have long recognized that laymen cannot be held to the standards of performance expected of members of the bar.2 Collateral estoppel is not an inexorable rule of law, and where a lay litigant may not be aware of the need to oppose an assertion of fact, the court's failure to indicate the consequences may promote just that kind of unfairness which gives reason for refusing to recognize a bar from the ensuing judgment.3

I think, then, that if the fact that Stebbins was an unrepresented layman were the only pivotal consideration in the case, we would have to proceed, as Judge Bazelon does, to determine whether Stebbins was so knowledgeable that the absence of such a warning was non-prejudicial. I do not reach that question, however, because I agree with Judge Leventhal that an estoppel could not arise here, and reversal is in any event required.