Look, I understand that some conservative jurists want to do everything in their power to make it difficult for people to file lawsuits in court. This panel doesn't have anyone on it who's keenly interested in pushing back on this front: the opinion is written by Judge Tung, joined by Judges Tallman and VanDyke.
It's nonetheless shocking how far this panel goes.
It's not a high-profile subject or an issue near and dear to anyone's political heart. It's instead about a fairly pedestrian and neutral principle of civil procedure called non-mutual issue preclusion. That doctrine's been around for over a century. Most states adopted it a long time ago, and the Supreme Court approved it on the federal side over 50 years ago. Basically -- and you might remember this from your first year class on civil procedure -- that if you're a party and have litigated and lost an issue once, you don't get to relitigate it again. You're issue precluded. It's a policy designed to promote both fairness and judicial efficiency. It's not controversial.
But the panel today holds, for the first time anywhere, that this doctrine is categorically inapplicable to a one and only one area of the law: arbitration agreements. The panel holds that even when a company is litigating the exact same issue in multiple lawsuits (namely, the validity of an arbitration agreement; e.g., whether it's unconscionable), and even when it has lost that issue multiple times in multiple suits, federal law affirmatively preempts the common law doctrine of issue preclusion and allows that party to relitigate this same issue again and again and again in the hopes that it can eventually find some judge who's willing to agree with it.
To be clear: That's not the law. Anywhere. On any issue. No court has ever so held. Not on the issue of the validity of an arbitration clause or on the validity of any other type of contractual clause either. Until today, everyone's understood that the longstanding, entirely neutral common law doctrine of nonmutual issue preclusion was generally applicable.
No longer.
Judge Tung explains at length why he's unhappy with nonmutual offensive issue preclusion. I get it. He thinks it's unfair. He thinks it doesn't make sense to bind a party to a loss on an issue in a different case since, if they'd have won on that same issue, they couldn't bind a different party in a different case. That is the "nonmutual" part of nonmutual issue preclusion, and in the 1800s, that was indeed the prevailing common law rule.
But here's the thing. The Supreme Court has said it's okay. In an 8-1 opinion -- Parklane Hosiery -- back in 1979, the Court addressed precisely the unfairness that Judge Tung isolates and held that it was nonetheless the right and proper policy for federal courts. No one's doubted that this reasoning applies to every issue to which preclusion might possibly be applied, including whether or not a particular contractual provision -- whether an arbitration clause or anything else -- was invalid. Again, until today.
Judge Tung doesn't like that, to hear him put it, non-mutual issue preclusion ostensibly turns a single lawsuit into a type of "class action" that binds others, and without the underlying Rule 23 safeguards. But my reaction to that is: Tell it to the Supreme Court. Because they're expressly okay with precisely the thing to which you're objecting. They considered precisely those arguments in Parklane Hosiery and rejected them. I'm sorry you disagree, but that's nonetheless the law. The only time the opinion even cites Parklane Hoisery is (1) in a footnote, that (2) simply explains what nonmutual offensive issue preclusion means. The opinion otherwise simply entirely ignores that holding.
The opinion insists that there's something special about arbitration clauses, because they purportedly demand "individual" adjudication. First of all, the text of the statute -- something that conservatives purported care about -- doesn't say that. Indeed, it says the exact opposite. Section 2 of the Federal Arbitration Act expressly says that courts are allowed to invalidate an arbitration clause pursuant to "such grounds that exist in law or in equity for the revocation of any contract." In other words, as long as you're invalidating a provision based on a generally applicable doctrine -- something that applies to all contracts, instead of singling out arbitration clauses specifically -- that's perfectly okay. That, my friends, is precisely what nonmutual offensive issue preclusion does. It was invented (by the Supreme Court, no less) to be generally applicable. They didn't even think about arbitration clauses when they were adopting the principle, much less singling such provisions out. It's a generally applicable rule, for goodness sake. You can't just say "Oh, well, I don't like it when applied to contractual provisions that I prefer. So I'm not going to let it apply then." The fact that arbitrations aren't class actions and ostensibly require "individual" adjudication doesn't mean that a generally applicable rule doesn't validly apply to them. Just like generally applicable rules about pleadings, notice and motion requirements, and pretty much every other single procedural rule applies across the board and doesn't "individually" isolate their impact on arbitrations. That doesn't mean they're invalid. It means precisely the opposite.
I understand that, in this particular case, the panel was upset because the plaintiffs were able to bind the defendant to unconscionability findings against them in two other cases notwithstanding the fact that in two different cases, the defendant had prevailed on that issue. So the results were inconsistent, and so it may well seem unfair to bind the defendant to the holdings of the two cases they lost while not letting them take advantage of the two cases in which they prevailed.
But guess what? The Supreme Court already not only thought of that, but expressly dealt with it. The Court took great pains to say in Parklane Hoisery that when such prior rulings are indeed inconsistent, the district court has discretion to refuse to apply offensive nonmutual issue preclusion in such a setting. That, again, is a generally applicable rule, applicable to arbitration clauses and every other contractual provision as well. If the panel had relied upon that generally applicable exception, great, that'd make total sense. But not only does the panel not do so, but it doesn't even mention that exception. Much less talk about how it solve the precise problem at issue here.
The opinion is also just flat wrong when it says that "[a]n equitable issue-preclusion doctrine (of the offensive non-mutual variety" is not a 'generally applicable contract defense." Yes, it is. It's precisely such a defense. It says that you're not allowed to invoke that defense -- that the provision of the contract the one that says that one side is not permitted to sue in court -- because we've already found that this contractual provision is unconscionable and hence invalid. That's a defense. It's a defense -- and undeniably a generally applicable one -- just like "but you put a gun to my head and make me sign it" is a defense. You're not allowed to enforce that provision. And, by the way, if issue preclusion isn't really a "defense" to a contract then neither is claim preclusion, or any other similar procedural rule, so the FAA apparently equally allows a party to relitigate unconscionability a thousand times if it feels like it in the same case, because claim preclusion or the other relitigation bars aren't "defenses" either. Silly.
I could go on identifying the errors in the panel's reasoning, but it's already getting frustrating to do so. The point is this: It's a generally applicable rule. It applies to everything. It doesn't make enforcing arbitration agreements impossible -- or even more difficult, honestly. It just says that once you lose, you can't relitigate the issue again. It's a neutral policy that protects the judicial process and that's designed to advance neutral principles of fairness and judicial efficiency. Once you've had your day in court and lost, you can't keep relitigating the exact same issue again and again and again. Such a rule, the United States Supreme Court has said, "reflects either the aura of the gaming table or a lack of discipline and disinterestedness on the part of the lower courts." I couldn't have said it better myself, in words that are squarely applicable here.
I get that this is perhaps a niche topic, and one of particular interest perhaps only to civil procedure scholars such as myself. Still. It matters. Law matters. Consistently matters. Following Supreme Court precedent matters. And, yes, it's true, the Supreme Court has never expressly said that its generally applicable nonmutual issue preclusion holdings apply equally to arbitration provisions like every other issue. Just like it's never expressly said that its holdings about putting guns to people's head and making them sign contracts applies equally to arbitration clauses. No matter. It's the same thing. The same rules apply to deciding the validity of arbitration clauses just like deciding the validity of each and every other type of contractual provisions. The rules are the same. Nonmutual offensive issue preclusion applies to each.
Until, for the first time ever, April Fool's Day, 2026 in the Ninth Circuit.
