• Apples to apples? The issue-preclusive effect of federal dismissals for failure to state a claim

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    Although the vocabulary of preclusion can be convoluted, the core concept is not: preclusion prevents relitigation of matters that have already been decided. The doctrine is intended to protect both litigants and the courts from unnecessary litigation and to respect the finality of judgments. You might think of it as a policy against allowing a second bite at the apple.

    Claim preclusion or res judicata, which is not treated in this post, prohibits the relitigation of claims that have already been decided on the merits as to the same parties. See, e.g., Auto. Grp., LLC v. A-1 Auto Charlotte, LLC, 230 N.C. App. 443, 446 (2013) (compiling cases).  Issue preclusion—or collateral estoppel—prohibits relitigation of a specific issue, regardless of the claim being brought. In North Carolina, issue preclusion requires: “(1) a prior suit resulting in a final judgment on the merits; (2) identical issues involved; (3) the issue was actually litigated in the prior suit and necessary to the judgment; and (4) [that] the issue was actually determined.” Fox v. Johnson, 243 N.C. App. 274, 285 (2015) (citation and internal quotation marks omitted; emphasis removed).

    Consider the following scenario with these issue preclusion conditions in mind. Plaintiff brings Claim #1, which includes proximate cause as an element of that claim. The court dismisses Claim #1 because it fails to adequately state the element of proximate cause. Plaintiff then brings a second lawsuit based on the same occurrence. Plaintiff’s new claim, Claim #2, includes the same proximate cause element as was present in Claim #1. Defendant moves for dismissal arguing that plaintiff cannot relitigate the issue of proximate cause when a court has already determined plaintiff’s failure to establish that element.

    Does defendant win? Probably so if both lawsuits were brought in North Carolina courts. If Claim #1 is dismissed by a federal court and Claim #2 is brought in a North Carolina state court, however, the answer is no.

    Is that because North Carolina courts don’t grant preclusive effect to federal judgments? Of course not. North Carolina courts are bound to respect both federal and sister-state court judgments, including by granting them preclusive effect. See, e.g., King v. Grindstaff, 284 N.C. 348, 360 (1973) (noting that “[f]ull faith must be given by State courts to final Federal Court judgments”). Why, then, does the federal court’s dismissal in our scenario not preclude plaintiff’s allegation? The answer is that there isn’t true identity of the issues—that is, the issue raised in Claim #2 isn’t a second bite at the same apple. Although the element of proximate cause is identical in both claims, the question of what it means to state a claim upon which relief can be granted is not. To understand why, let’s briefly review the development of North Carolina’s pleading standard.

    Pleading standards in state and federal courts.

    North Carolina is a “notice pleading” state. This means a plaintiff’s complaint need only provide sufficient notice of her claim to allow a defendant to effectively respond.  See, e.g., Pyco Supply Co., Inc. v. Am. Centennial Ins. Co., 321 N.C. 435, 442 (1988).  Under this standard, “[a] complaint should not be dismissed … unless it affirmatively appears that the plaintiff is entitled to no relief under any state of facts which could be presented in support of the claim;” this “sufficiently liberal construction of complaints” means “that few fail to survive a motion to dismiss.” Button v. Level Four Orthotics & Prosthetics, Inc., 2022-NCSC-19, ¶ 27 (2022) (citations and internal quotation marks omitted). N.C. Rule of Civil Procedure 12(b)(6) allows a defendant to seek dismissal for failure to state a claim upon which relief can be granted—a standard set out in N.C. Rule of Civil Procedure 8(a).

    Following the federal court’s shift to notice pleading, North Carolina adopted its own notice pleading standard as part of the 1970 enactment of the North Carolina Rules of Civil Procedure, intending to “eliminate the formalism seen in pleading prior to the introduction of the Rules of Civil Procedure.” Cornelius v. Cornelius, 87 N.C. App. 269, 271 (1987); see also Sutton v. Duke, 277 N.C. 94, 100 (1970) (discussing the adoption of the standard).

    Almost forty years later, however, the United States Supreme Court significantly refashioned the federal pleading standard: “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This federal “plausibility” standard is now more stringent than the North Carolina standard. As a result, a complaint that would survive a motion for dismissal pursuant to N.C. R. Civ. P. 12(b)(6) might well be dismissed if challenged in federal court.

    What exactly does this have to do with preclusion? Let’s apply this knowledge to our original scenario.

    The effect of pleading standards on the analysis of issue preclusion

    In Fox v. Johnson, 243 N.C. App. 274 (2015), the North Carolina Court of Appeals considered an iteration of our scenario above. Claim #1 was dismissed in federal court for failing to state a claim upon which relief could be granted with respect to the element of proximate cause. A new lawsuit was subsequently initiated in state court, with Claim #2 containing the identical element of proximate cause. As in our hypothetical, defendants argued that issue preclusion prevented the relitigation of the issue of proximate cause.

    The court of appeals affirmed the trial court’s denial of defendants’ motion.[1] Not because the issue of proximate cause wasn’t the same for both claims, but because the pleading standard was different. Fox, 243 N.C. App. at 284-87; see also Bishop v. Cty. of Macon, 250 N.C. App. 519, 524 (2016) (applying Fox).

    As the court of appeals reasoned: “the issue actually litigated in the prior suit and actually determined by the federal court, was whether Plaintiffs’ pleadings met the plausibility standard applicable to motions to dismiss pursuant to Federal Rule 12(b)(6).” Fox, 243 N.C. App. at 287 (citation and internal quotation marks and alterations omitted). As such, the federal court never actually determined whether the Fox plaintiffs’ pleadings met the more liberal notice pleading standard applicable to motions to dismiss in North Carolina when it found the plaintiffs failed to sufficiently allege the element of proximate cause. Id. Therefore, the North Carolina court was considering a fundamentally different issue: whether the plaintiffs failed to sufficiently allege proximate cause under the North Carolina pleading standard.  Id.

    To return to our initial question then, can a plaintiff litigate an issue in North Carolina courts after a federal court has ruled against her on the same issue? No, not where the issue before the two courts is truly identical. But issue preclusion requires careful assessment of the issue decided; it’s got to be the same apple. Because the phrase “state a claim upon which relief can be granted” means something fundamentally different in federal and state court, issue preclusion is not appropriate where an integral component of the issue is whether a plaintiff has stated a claim upon which relief can be granted. In that scenario, it’s a bite at a brand-new apple in state court.

    A final note on choice-of-law and preclusion

    It is worth noting that the Fox and Bishop courts apply North Carolina preclusion law without considering whose preclusion law should apply—that is, without conducting a choice-of-law inquiry. The U.S. Supreme Court, however, has stated that “[t]he preclusive effect of a federal-court judgment is determined by federal common law.” Taylor v. Sturgell, 553 U.S. 880, 891 (2008); cf. Barrow v. D.A.N. Joint Venture Properties of N.C., LLC, 232 N.C. App. 528, 530-31 (2014) (quoting Semtek International Inc. v. Lockheed Martin Corp., 531 U.S. 497 (2001) for the proposition that the U.S. Supreme Court “has the last word on the claim-preclusive effect of all federal judgments”).

    How much did the omission of the choice-of-law analysis matter in Fox? Probably not much. Federal issue preclusion law is substantially similar to that of North Carolina on the question of identity of issues. See, e.g., Coleman v. Cmty. Trust Bank, 426 F.3d 719, 729 (4th Cir. 2005) (setting forth the elements for claim preclusion, including “(1) the issue to be precluded is identical to the issue already litigated” and “(2) the issue was actually determined in the prior proceeding”). Thus, for the question before the Fox court, the result likely would have been the same regardless of the law the court of appeals applied.  However, in other preclusion doctrine applications, the choice-of-law question may well be critical.


    [1] For complicated procedural reasons that do not affect our discussion here, the defendant’s arguments regarding the issue-preclusive effect of the federal court’s Rule 12(b)(6) dismissal were resolved in state court pursuant to Rule 12(c). See Fox, 243 N.C. App. at 283.


    Emily Turner joined the School of Government in July 2021. Her work focuses on civil procedure, civil trials, and hearings. Immediately prior to joining the School, she worked as a staff attorney at the North Carolina Justice Center in Raleigh, where she focused on impact litigation in the realm of civil rights and social justice. She joined the Justice Center as the inaugural Leslie J. Winner Fellow in Public Interest and Civil Rights. Prior to joining the Justice Center, Turner clerked for the Hon. Srikanth Srinivasan on the U.S. Court of Appeals for the D.C. Circuit.

    Turner received her J.D. summa cum laude from the University of Pennsylvania School of Law, where she served as senior editor on the University of Pennsylvania Law Review. She earned her A.B. summa cum laude from Bryn Mawr College. She is a member of the North Carolina State Bar.
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