Arizona Court of Appeals Division One holds that issue preclusion prevents a party from relitigating personal jurisdiction when a foreign judgment is domesticated if personal jurisdiction was already litigated in the foreign court.

A judgment creditor obtained a default judgment against a trustee in a Connecticut court. The trustee then moved to set aside the judgment and moved to dismiss based on lack of personal jurisdiction, arguing that he was not properly served. The Connecticut trial court denied the motions, finding that the trustee was properly served in Arizona, and the Connecticut Court of Appeals affirmed. The trustee filed a new motion to set aside the Connecticut judgment in Arizona under ARCP 60, again arguing lack of personal jurisdiction. The superior court granted the motion.

The Court of Appeals vacated the judgment. It explained that a defendant named in a foreign lawsuit who believes the forum state lacks personal jurisdiction has two choices: (1) appear and challenge the court’s jurisdiction, or (2) ignore the foreign suit and challenge jurisdiction when the plaintiff attempts to domesticate the default judgment. The issue before the court was whether claim or issue preclusion applies when a defendant chooses option one and litigates jurisdiction in the forum state then attempts to challenge jurisdiction again in Arizona. The court held that issue preclusion prevents the defendant from relitigating personal jurisdiction. It reasoned that applying issue preclusion makes more sense than claim preclusion because personal jurisdiction is not a claim or cause of action, but instead is typically raised as a defense. Further, applying issue preclusion is consistent with how courts treat personal jurisdiction in the context of a foreign default judgment. Applying claim preclusion would prevent a defendant who ignores a foreign lawsuit from challenging jurisdiction when the plaintiff attempts to enforce the judgment in a domestic court. Applying issue preclusion preserves the possibility. The trustee argued that personal jurisdiction was not fully litigated in the Connecticut court because there he challenged jurisdiction based on failure to properly serve but did not allege lack of minimum contacts. However, the court rejected this argument, explaining that a party who suffers an adverse determination of ultimate fact or law cannot subsequently marshal new facts or arguments to obtain a different determination. Moreover, permitting a defendant to relitigate issues in multiple courts by simply claiming new facts or making new arguments would undermine the finality of judgments that issue preclusion is meant to preserve.

The special concurrence objected to the court engaging in an issue-preclusion analysis and would have instead vacated the judgment based on res judicata. The issue of personal jurisdiction was fully litigated and resolved in the Connecticut court. That the trustee failed to raise minimum contacts would not disturb that judgment because a party is not permitted to hold back portions of its jurisdictional challenges to assert them in a later proceeding.

Judge Michael S. Catlett authored the opinion in which Judge Paul J. McMurdie joined and Judge Michael J. Brown specially concurred.

Posted by: Michael Price