Valid final judgments must be issued by courts with appropriate personal and subject matter jurisdiction. It is notable, however, that an error does not make a decision invalid. Reversible errors must be appealed.
Collateral estoppel does not prevent an appeal of a decision, or a party from asking the judge for reargument or a revised decision. In federal court, judgments on appeal are given preclusive effect. However, if the decision is vacated, the preclusive effect of the judgment fails.
Collateral estoppel cases raise constitutional due process problems, particularly when it is applied to a party that did not participate in the original suit. Due process mandates that collateral estoppel not be applied to a party that has not actually litigated the issue in dispute, unless that party is in legal privity to a party that did actually litigate it. In other words, every disputant is entitled to a day in court and cannot ordinarily be bound by the negative result of another disputant's suit, even if that other disputant had exactly the same legal and factual arguments.
Due process concerns also can arise even when a party did have a day in court to dispute an issue. For example, a defendant may have not effectively litigated an issue decided against the defendant in an earlier suit because the damages were too small, so it may be unjust to bar the defendant from relitigating the issue in a trial for much greater damages. As another example, suppose that a defendant did effectively litigate an issue to a favorable conclusion in nine cases, but to an unfavorable result in a tenth case. In this situation, note that the defendant did not have the opportunity to use the nine judgments in its favor as collateral estoppel against subsequent plaintiffs, because that would violate their right to a day in court. To allow a subsequent plaintiff to use the tenth, negative judgment as collateral estoppel against the defendant may seem unjust. See the leading Supreme Court case Parklane Hosiery Co, Inc. v. Shore.
Traditionally, collateral estoppel applied only where there was mutuality of parties, meaning that both the party seeking to employ collateral estoppel and the party against which collateral estoppel is sought were parties to the prior action.
Most courts have now abandoned mutuality as a requirement for collateral estoppel in most circumstances. The modern trend is clearly in favor of abandoning the mutuality requirement.
In the absence of mutuality, courts are more hesitant to apply collateral estoppel in an offensive setting than in a defensive one. In other words, courts are more hesitant to apply collateral estoppel to a defendant from a previous action if the defendant is sued by a new plaintiff for the same issue.
But note that the use of offensive non-mutual collateral estoppel may work against the goal of judicial economy. The offensive use encourages potential plaintiff's to sit and "test the waters" to see the strength of the defendant's case. If the defendant's case is weak, there is great incentive for new parties to sue and claim that the defendant is estopped based on the prior adverse ruling.
See also direct estoppel.
Neither Issue Preclusion nor Claim Preclusion Bar PTO Trademark Challenges despite District Court Litigation on Dilution and Infringement
Jul 31, 2013; In Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., Nos. 12-1495, -1496 (Fed. Cir. June 18, 2013), the Federal Circuit held...