The Ties that Bind – or Don’t...

The Ties that Bind – or…

Imagine that your employee happens to be at a work site in the course of his job, doing exactly what he’s supposed to be doing, alongside workers employed by other companies who similarly are working diligently. Now let’s say that your employee is using a piece of equipment that malfunctions in such a way that it causes injuries, not just to your employee but to some of the other workers nearby. You perform a preliminary investigation in accordance with your standing operating procedure, determine that neither your employee nor any of the nearby workers did anything wrong, and that the equipment failure did not result from any negligence or wrongdoing by anyone at the site. If your employee was injured, you guide him on how to pursue a workers’ compensation claim, his claim is paid, and you assume that other workers and their employers and proceeding in similar fashion. As far as you know, that’s that, and you go on with business as usual.

Then, some time later, you receive a demand letter from an attorney representing one of the other injured workers advising you that his client blames you and your employee for causing her injuries, and that unless you pay her demand she will file suit against you. You have already determined no one on your end was at fault, so you reject the demand, and the injured worker then sues your company. You (or your insurer) hire defense counsel, and the litigation begins.

So far, nothing appears out of the ordinary in this scenario, right? Then . . . in the course of the litigation, you learn that the plaintiff had also instituted a workers’ compensation claim for her reported injuries (not surprisingly), and that the workers’ compensation claim has resulted in an award for the plaintiff determining both the cause of her injuries and the severity of those injuries, including the amount of past and future medical costs and wage loss. You had nothing to do with the workers’ compensation claim, of course, so you receive that news with a shrug of your shoulders. And then, your attorney hits you with two words you’ve never heard before: collateral estoppel. Very roughly translated from the quaint legalese, that means, “You just got stuck with a fact determination made in somebody else’s lawsuit, and it doesn’t matter how much evidence you have that the other lawsuit got it wrong.”

If this scenario sounds incredible or unbelievable, it isn’t. “Collateral estoppel, or issue preclusion, provides that once a court of competent jurisdiction actually and necessarily determines an issue, that determination remains conclusive in subsequent suits, based on a different cause of action but involving the same parties, or privies, to the previous litigation.” Weinberger v. Tucker, 510 F.3d 486, 491 (4th Cir. 2007). See TransDulles Center, Inc. v. Sharma, 252 Va. 20, 22, 472 S.E.2d 274, 275 (1996) (collateral estoppel “precludes parties to a prior action and their privies from litigating in a subsequent action any factual issue that actually was litigated and was essential to a valid, final judgment in the prior action”). The word “privy” here doesn’t mean what you might think it does – a “privy” is “a person participating directly in or having a derivative interest in a legal proceeding.” In other words, just because you are not a party in a lawsuit doesn’t mean that you don’t have a “derivative interest” in that lawsuit. And that’s the heart of collateral estoppel.

“In Virginia, collateral estoppel requires: (1) the parties to the two proceedings, or their privies, be the same; (2) the factual issue sought to be litigated must have been actually litigated in the prior action and must have been essential to the prior judgment; and (3) the prior action must have resulted in a valid, final judgment against the party sought to be precluded in the present action.” Weinberger, 510 F.3d at 491 (emph. supp’d). “Additionally, in Virginia collateral estoppel requires a fourth element, mutuality.” Id. “Mutuality” means that “a party is generally prevented from invoking the preclusive force of a judgment unless that party would have been bound had the prior litigation of the issue reached the opposite result.” TransDulles, 252 Va. at 23, 472 S.E.2d at 275.

“Under both Fourth Circuit and Virginia decisions, the test for privity is the same: whether the interests of one party are so identified with the interests of another that representation by one party is representation of the other’s legal right.” Weinberger, 510 F.3d at 491. “The touchstone of privity . . . is that a party’s interest is so identical with another that representation by one party is representation of the other’s legal right.” Id. at 491-92. Importantly, the “concept of privity requires an alignment of interests and not an exact identity of parties.” Id. at 492 (emph. supp’d). Put another way, “privity” means “that the relationship between the one who [was] a party on the record and another is close enough to conclude that other within” issue preclusion. Id. (cit. omit’d).

Generally, however, “[p]rivity requires that a party’s interest be ‘so identical’ with another ‘that he represents the same legal right.’” State Farm Fire & Cas. Co. v. Mabry, 255 Va. 286, 289, 497 S.E.2d 844, 846 (1998), quoting Nero v. Ferris, 222 Va. 807, 813, 284 S.E.2d 828, 831 (1981). Therefore, collateral “estoppel, because it concludes [sic] a party from alleging the truth, must be certain to every intent and its scope should not be extended by argument or inference.” D’Ambrosio v. Wolf, 295 Va. 48, 58, 809 S.E.2d 625, 630 (2018), quoting Gilmer v. Brown, 186 Va. 630, 637, 44 S.E.2d 16, 19 (1947).

So, back to our scenario – what does all this mean in your case? Whether the final award entered in the plaintiff’s related workers’ compensation claim is going to bind you to the Commission’s fact determinations on the cause and nature of the plaintiff’s injuries, her medical costs and wage loss, and prognosis for improvement in her condition will depend on whether your interests as they appear in the separate lawsuit the plaintiff has filed against you are deemed “so identical” with those of the plaintiff’s employer and its workers' compensation insurer in their defense of the comp claim that you are deemed to have had a “derivative interest” in the comp claim. In other words, it all depends on whether you are determined to be the employer’s “privy,” as well as whether the fact determinations made in the comp claim or other related lawsuit were the result of an actual adjudication, as opposed to a compromise settlement. That determination necessarily has to be made on a case-by-case basis; there is no one-size-fits-all answer.

The scenario imagined here is just one of any number of ways that you might find yourself bound to a judgment in a lawsuit you’ve never even heard of, under the doctrine of collateral estoppel. Having someone on your staff, or your outside legal counsel, monitor local court dockets and the Workers' Compensation Commission in the weeks and months following a reported workplace injury – even one not directly involving your own employees – is just one way to try to avoid the nasty surprise of issue preclusion. Here as in some many other areas of business life, being proactive can spare you a great deal of headache and heartache later, particularly with the advice of experienced legal counsel. Avoiding surprises is always a good rule of thumb in business – especially when it comes to litigation. If you have questions on this point or need guidance, please contact Kevin Streit ( at (804) 377-1270 or Steve Setliff ( at (804) 377-1261.