| Venue: |
6th Cir
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| Facts: |
Gargallo opens a margin account, loses it all, owes $17K. |
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| Posture: |
Merrill Lynch sues in OH state court, counterclaims for churning
and federal securities laws. Dismissal with prejudice for
Gargallo's failure to follow discovery orders. Gargallo now
sues in US district court for S.D. OH about violations of
federal securities laws based on the same transactions at
issue in the state litigation. Dismissed for res
judicata. Appeal. |
|
| Issue: |
Two of them:
- Whether a federal court should apply federal or state
claim preclusion law when deciding
- Whether a prior state court judgment over a matter that
should only have been brought in federal court
is a bar to a subsequent suit on an identical cause
of action
|
|
| Holding: |
State and no. |
|
| Rule: |
Federal courts determine the claim-preclusive effect of prior state
judgments pursuant to the law of the state in which the judgment
was entered. Ohio follows R(2)J: a judgment by a court lacking
subject matter jurisdiction does not get claim-preclusive effect. |
|
| Reasoning: |
A judgment dismissing with prejudice is a final judgment on the
merits. Generally this gets claim-prelusive respect. And we
have caselaw that says § 1738 (full faith and credit) means
we decide whether to give preclusive effect to a state court
judgment using the same rule that the state court who issued
it would. Over yonder in Ohio, they're R(2)J folk, and that
says no preclusion for judgments entered by courts lacking
subject matter jurisdiction. |
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| Dicta: |
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