CSX Transportation, Inc. v. General Mills, Inc. , 846 F.3d 1333 ( 2017 )

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 15-12095
________________________
D.C. Docket No. 1:14-cv-00201-TWT
CSX TRANSPORTATION, INC.,
Plaintiff - Appellant,
versus
GENERAL MILLS, INC.,
Defendant - Appellee.
________________________
No. 15-14399
________________________
D.C. Docket No. 1:14-cv-00201-TWT
CSX TRANSPORTATION, INC.,
Plaintiff - Appellant,
versus
GENERAL MILLS, INC.
Defendant - Appellee.
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________________________
Appeals from the United States District Court
for the Northern District of Georgia
________________________
(January 30, 2017)
Before WILLIAM PRYOR, and ROSENBAUM, Circuit Judges, and
MARTINEZ, * District Judge.
WILLIAM PRYOR, Circuit Judge:
Our caselaw contains discordant answers to the question whether federal
common law borrows the doctrine of collateral estoppel as defined by state law,
Palmer & Cay, Inc. v. Marsh & McLennan Cos., 404 F.3d 1297, 1310 (11th Cir.
2005), or applies the doctrine only as defined by federal law, Tampa Bay Water v.
HDR Engineering, Inc., 731 F.3d 1171, 1179 (11th Cir. 2013), to determine the
preclusive effect of an earlier judgment of a federal court that exercised diversity
jurisdiction. This appeal requires that we resolve that discord. In an earlier action
before a federal court that exercised diversity jurisdiction, a jury found CSX
Transportation solely liable for injuries suffered by an employee of General Mills
and awarded the employee damages. CSX filed this action for indemnification
from General Mills. The district court dismissed this action on the ground that a
contract between the parties barred indemnification for damages “arising from
[CSX’s] . . . sole negligence.” To reach this result, the district court applied a
*
Honorable Jose E. Martinez, United States District Judge for the Southern District of Florida,
sitting by designation.
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federal rule of collateral estoppel to bar relitigation of the relative fault of General
Mills for the injury suffered by its employee. We reverse and remand because
federal common law adopts the state rule of collateral estoppel to determine the
preclusive effect of a judgment of a federal court that exercised diversity
jurisdiction.
I. BACKGROUND
In 1989, CSX Transportation and General Mills entered into a Sidetrack
Agreement for the construction, use, and maintenance of a sidetrack railway line.
The sidetrack subject to the agreement is a “spur track”; it provides railway access
from a rail line operated by CSX to a processing facility owned by General Mills.
The Sidetrack Agreement grants General Mills the right to conduct “switching” on
the sidetrack. Switching is “the process of moving railcars that have been
previously delivered by a train . . . in the proper order so that they can be coupled
to a locomotive and pulled out of a customer’s facility.” To conduct switching,
General Mills acquired a trackmobile, a “mobile railcar mover, capable of traveling
on both roads and railroad tracks, fitted with couplers for moving small numbers of
railcars.”
Section 15 of the Sidetrack Agreement contains a specific liability provision
for switching. In consideration for the use of the sidetrack, General Mills assumed
“all risk of loss, damage, cost, liability, judgment and expense . . . in connection
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with any personal injury to or death of any persons, or loss of or damage to any
property, . . . that may be sustained or incurred in connection with, . . . the
operation of [General Mills’s] trackmobile or locomotive power.” The Sidetrack
Agreement also contains a general liability provision, Section 11, that relieves
General Mills of liability “for all losses arising from [CSX’s] . . . sole negligence.”
On June 5, 2005, two employees of General Mills, Doug Burchfield and
Rodney Turk, were switching railcars on the sidetrack. Turk moved a railcar to a
holding track with the trackmobile. The railcar, which Turk did not properly
secure, rolled down the track, collided with two other railcars, and hit Burchfield
who suffered serious injuries.
Burchfield filed a complaint against CSX for his injuries and invoked the
diversity jurisdiction of the district court. Burchfield v. CSX Transp., Inc., No. 107-
CV-1263, at *9 n.1 (N.D. Ga. May 15, 2009). Before trial, the district court
granted Burchfield’s motion for a partial summary judgment against the defense of
CSX that General Mills was at fault for the accident. CSX prevailed at trial, but on
appeal we reversed on evidentiary grounds and remanded. Burchfield v. CSX
Transp., Inc., 636 F.3d 1330, 1338 (11th Cir. 2011). At the retrial, a jury found
CSX solely at fault and awarded Burchfield more than $20 million in damages.
The parties later settled the claim for $16 million.
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CSX then requested indemnification from General Mills. General Mills
denied the request, and CSX filed this suit. The complaint alleged that the
Sidetrack Agreement requires General Mills to indemnify CSX. General Mills
moved to dismiss the complaint on the ground that the Sidetrack Agreement does
not require indemnification because the jury found CSX solely at fault for
Burchfield’s injuries and collateral estoppel prohibits relitigation of the fault of
General Mills. The district court dismissed the complaint.
CSX filed a motion for reconsideration or, in the alternative, leave to file an
amended complaint, in which it argued that the district court erred because it
applied collateral estoppel as defined by federal law, not state law. According to
CSX, had the district court applied collateral estoppel as defined by the law of
Georgia, CSX would have been permitted to relitigate the relative fault of General
Mills. Unlike the federal rule of collateral estoppel, collateral estoppel as defined
by Georgia law requires the earlier judgment to have been rendered in litigation
between identical parties or their privies. Compare Parklane Hosiery Co. v. Shore,
439 U.S. 322, 331 (1979), with ALR Oglethorpe, LLC v. Henderson, 783 S.E.2d
187, 192 (Ga. Ct. App. 2016). The district court initially granted the motion to file
an amended complaint, but on reconsideration later denied it.
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II. STANDARDS OF REVIEW
“We review de novo the district court’s grant of a Rule 12(b)(6) motion to
dismiss for failure to state a claim, accepting the complaint’s allegations as true
and construing them in the light most favorable to the plaintiff.” Chaparro v.
Carnival Corp., 693 F.3d 1333, 1335 (11th Cir. 2012) (quoting Cinotto v. Delta
Air Lines Inc., 674 F.3d 1285, 1291 (11th Cir. 2012)). We review whether the
doctrine of collateral estoppel is available de novo. Dailide v. U.S. Att’y Gen., 387
F.3d 1335, 1341 (11th Cir. 2004).
III. DISCUSSION
Before we address the merits, we must first determine whether CSX
preserved this issue for appeal. “A federal appellate court will not, as a general
rule, consider an issue that is raised for the first time on appeal.” In re Pan Am.
World Airways, Inc., Maternity Leave Practices & Flight Attendant Weight
Program Litig., 905 F.2d 1457, 1461–62 (11th Cir. 1990). “[I]f a party hopes to
preserve a[n] . . . argument, . . . [it] must first clearly present it to the district court
. . . in such a way as to afford the district court an opportunity to recognize and rule
on it.” Id. at 1462.
CSX argues, and we agree, that it preserved its argument that federal
common law adopts the state rule of collateral estoppel to determine the preclusive
effect of an earlier judgment of a federal court that exercised diversity jurisdiction.
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In footnote four of the brief CSX filed in response to the motion to dismiss of
General Mills, CSX argued that our precedent bound the district court to apply
collateral estoppel as defined by federal law, but that this precedent was wrong
because state law should apply. Although CSX went on to argue in the same brief
that collateral estoppel as defined by federal law did not bar relitigation of the
negligence of General Mills, the footnote presented a full argument. It cited
relevant authority and reasoned by syllogism. That the argument appeared in a
footnote does not affect our conclusion. Cf. United States Sec. Exch. Comm’n v.
Big Apple Consulting USA, Inc., 783 F.3d 786, 812 (11th Cir. 2015) (“The
defendants’ fleeting footnote explaining in one sentence that such evidence ‘could
be relevant’ is insufficient to properly assert a claim on appeal.”). And in any
event, the appropriate federal common law rule of collateral estoppel is a “pure
question of law” that we “will consider” for the first time on appeal. Access Now,
Inc. v. Sw. Airlines Co., 385 F.3d 1324, 1331–32 (11th Cir. 2004) (quoting Wright
v. Hanna Steel Corp., 270 F.3d 1336, 1342 (11th Cir. 2001)).
Whether federal common law borrows the state rule of collateral estoppel to
determine the preclusive effect of a judgment rendered by a court that exercised
diversity jurisdiction is unclear under our caselaw. Compare CSX Transportation,
Inc. v. Brotherhood of Maintenance of Way Employees, 327 F.3d 1309, 1316 (11th
Cir. 2003) (“We now hold that federal preclusion principles apply to prior federal
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decisions, whether previously decided in diversity or federal question
jurisdiction.”), and Tampa Bay Water, 731 F.3d at 1180 (applying “federal
collateral estoppel law to determine the preclusive effect” of a summary judgment
granted by a district court sitting in diversity jurisdiction (emphasis added)), with
SFM Holdings, Ltd. v. Banc of Am. Sec., LLC, 764 F.3d 1327, 1336 (11th Cir.
2014) (“Under Semtek, federal common law generally incorporates state law to
determine the preclusive effect of a federal diversity judgment.”), and Palmer &
Cay, 404 F.3d at 1309–10 (applying the state law of collateral estoppel to
determine the preclusive effect of a declaratory judgment rendered by a federal
court sitting in diversity jurisdiction). Because we must not “speak[] from both
sides of [our] mouth,” Bryan A. Garner, et al., The Law of Judicial Precedent 300
(2016), we must resolve this uncertainty and determine which of our precedents
binds us.
Some of the confusion in our caselaw is explained on the ground that the
answer to the question before us is, as stated, one of federal common law. Palmer
& Cay, 404 F.3d at 1310 (citing Semtek Int’l Inc. v. Lockheed Martin Corp., 531
U.S. 497, 509 (2001)). That is, regardless of whether we incorporate collateral
estoppel as defined by state law or apply a federal rule, we apply federal common
law. Cf. Semtek, 531 U.S. at 508. That federal common law determines the
preclusive effect of an earlier judgment against a party, even if federal common
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law borrows the state rule, has likely caused confusion in our decisions. Our
decisions, for example, contain imprecise statements such as “federal preclusion
principles apply,” Brotherhood, 327 F.3d at 1316; see also Tampa Bay Water, 731
F.3d at 1179.
In Semtek International, Inc. v. Lockheed Martin Corp., 531 U.S. 497(2001), the Supreme Court addressed the related question, whether federal
common law adopts the state rule of res judicata to determine the preclusive effect
of an earlier judgment of a federal court that exercised diversity jurisdiction. Id. at
499. The Supreme Court applied federal common law and held that the “claim-
preclusive effect” of the judgment of a federal court that exercised diversity
jurisdiction is determined by “the law that would be applied by state courts in the
State in which the federal diversity court sits.” Id. at 508 (citations omitted). The
Supreme Court explained that “[t]his is . . . a classic case for adopting, as the
federally prescribed rule of decision,” state law, because “state, rather than federal,
substantive law is at issue . . . [a]nd indeed, nationwide uniformity in the substance
of the matter is better served by having the same claim-preclusive rule (the state
rule) apply whether the dismissal has been ordered by a state or a federal court.”
Id. (citations omitted).
If we were deciding the question presented for the first time in our Circuit,
the reasoning of Semtek would likely compel our conclusion. The doctrines of
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collateral estoppel and res judicata are insufficiently distinct to warrant different
treatment under the rationale of Semtek. But we do not address this question in the
first instance, and the holding of Semtek does not reach the precise question before
us––the appropriate rule of collateral estoppel or issue preclusion.
Our precedents after Semtek contain contradictory and confusing answers to
the question presented so we apply two principles to parse our jumbled caselaw.
First, we distinguish between the holding and dicta of a decision. “The holding of
an appellate court constitutes the precedent, as a point necessarily decided. Dicta
do not: they are merely remarks made in the course of a decision but not essential
to the reasoning behind that decision.” Garner, et al., supra at 44 (emphasis
omitted); accord United States v. Kaley, 579 F.3d 1246, 1253 n.10 (11th Cir.
2009). Second, we are bound to follow an earlier holding “unless and until it is
overruled or undermined to the point of abrogation by the Supreme Court or by
this court sitting en banc.” United States v. Archer, 531 F.3d 1347, 1352 (11th Cir.
2008). But, “[w]hen we have conflicting [precedents], we follow our oldest
precedent.” United States v. Madden, 733 F.3d 1314, 1319 (11th Cir. 2013)
(citation omitted); see also Walker v. Mortham, 158 F.3d 1177, 1188 (11th Cir.
1998) (adopting the “earliest case rule” for intracircuit splits); accord Garner, et
al., supra, at 303 (“With an intermediate appellate court, an earlier horizontal
precedent nearly always rules.”).
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Our first precedent after Semtek to mention the question presented is
Brotherhood of Maintenance of Way Employees, 327 F.3d 1309. General Mills
relies on the following statement in that decision: “We now hold that federal
preclusion principles apply to prior federal decisions, whether previously decided
in diversity or federal question jurisdiction.” Id. at 1316 (citing Winters v.
Diamond Shamrock Chem. Co., 149 F.3d 387, 393 n.6 (5th Cir. 1998) (“[F]ederal
law of issue preclusion applied because the prior decision had been issued by a
federal court, albeit in a diversity action.”)). At first blush, our statement appears to
support the position of General Mills that federal common law incorporates
collateral estoppel as defined by federal law to bar relitigation of the issue in this
appeal, whether General Mills caused Burchfield’s injuries. Notably, when we
made this statement, we did not mention Semtek, which the Supreme Court had
decided only two years before we decided Brotherhood.
Even if we assume that Brotherhood stated a rule about collateral estoppel
and an earlier federal judgment where the court exercised diversity jurisdiction,
that rule has no precedential effect because it was not part of our holding. That is,
the rule does not bind us. The question in Brotherhood was the preclusive effect of
“a federal question previously decided by a federal court,” not a question of state
law decided by a federal court that exercised diversity jurisdiction. Id. Whether
federal common law incorporates collateral estoppel as defined by state or federal
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law to apply to earlier judgments of federal courts that exercised diversity
jurisdiction was unnecessary “as a justification for the decision reached.” Garner,
et al., supra, at 46.
In contrast with the dicta from Brotherhood, a later decision, Palmer & Cay,
404 F.3d 1297, squarely presented the issue whether federal common law
incorporates collateral estoppel as defined by state law to determine the preclusive
effect of an issue previously decided by a federal court that exercised diversity
jurisdiction. Id. at 1310. Palmer & Cay required us to determine whether a district
court that exercised diversity jurisdiction erred when it limited the preclusive effect
of a declaratory judgment to the State of Georgia. Id. at 1309. We rejected the
geographic limitation imposed by the district court. Without any mention of the
dicta from Brotherhood, we based our decision on Semtek and concluded that a
court asked to enforce the declaratory judgment must apply federal common law,
which in turn borrows the state rule where the district court exercised diversity
jurisdiction, and the district court failed to follow this approach. Id. at 1310 (citing
Semtek, 531 U.S. at 509). Unlike the rule announced in Brotherhood, our
conclusion that federal common law incorporates collateral estoppel as defined by
state law was part of our holding in Palmer & Cay. It was a “ruling on a point of
law” that was necessary to our decision. Garner, et al., supra, at 46.
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To complicate matters further, in Tampa Bay Water, which we decided after
Palmer & Cay, we held the opposite. We cited Brotherhood for the proposition
that federal common law incorporates collateral estoppel as defined by federal law
to determine the preclusive effect of issues decided by a federal court that
exercised diversity jurisdiction, and we applied that rule. Tampa Bay Water, 731
F.3d at 1179–80 (citing Brotherhood, 327 F.3d at 1316). Our application of the
rule announced in Brotherhood was part of our holding in Tampa Bay Water
because we applied collateral estoppel as defined by federal law to the earlier
judgment of a federal court that exercised diversity jurisdiction. Id. at 1180–81.
But in Tampa Bay Water, we did not discuss Semtek, nor did we mention our
precedent in Palmer & Cay. And we did not discuss the possibility that federal
common law could borrow the state rule of collateral estoppel to determine the
preclusive effect of an earlier federal judgment when the district court exercised
diversity jurisdiction.
In sum, our caselaw contains two lines of divergent precedent, neither of
which acknowledges the other. One of those lines of precedent, Brotherhood and
Tampa Bay, fails to mention Semtek, a Supreme Court precedent, and instead sows
confusing dicta into our analysis. Brotherhood, 327 F.3d at 1316 (“We now hold
that federal preclusion principles apply to prior federal decisions . . . previously
decided in diversity . . . jurisdiction.”). But, precisely because that confusing
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statement was dicta, the true conflict in our precedent is between Palmer & Cay
and Tampa Bay Water. Palmer & Cay holds that federal common law borrows the
state rule of collateral estoppel to determine the preclusive effect of issues decided
by a federal court that exercised diversity jurisdiction, 404 F.3d at 1310, and
Tampa Bay Water holds the opposite––that federal common law applies the federal
rule to resolve the same question, 731 F.3d at 1180.
Under the earliest precedent rule, see Madden, 733 F.3d at 1319, Palmer &
Cay binds us in this and future appeals because we decided it before we decided
Tampa Bay Water. And we cannot reconcile our holdings in Palmer & Cay and
Tampa Bay Water, which “[i]f at all possible” we should do, see Garner, et al.,
supra, at 300, because they announced incompatible rules. We hold that federal
common law borrows the state rule of collateral estoppel to determine the
preclusive effect of a federal judgment where the court exercised diversity
jurisdiction.
The parties dispute one element of collateral estoppel as defined by Georgia
law: that the earlier litigation must have been between identical parties. Unlike the
federal rule of collateral estoppel, which allows non-parties to the previous action
to assert the doctrine offensively or defensively, Parklane, 439 U.S. at 327, Collins
v. Seaboard Coastline R.R. Co., 681 F.2d 1333, 1334 (11th Cir. 1982), a party who
asserts collateral estoppel as defined by Georgia law must prove that the issue
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decided in earlier litigation was “between identical parties,” Cmty. State Bank v.
Strong, 651 F.3d 1241, 1264 (11th Cir. 2011). The identity requirement includes
parties and their privies, Oglethorpe, 783 S.E.2d at 192. General Mills argues that
it was in privity with Burchfield in the underlying litigation, which necessarily
defeats the claim for indemnification. CSX counters that Burchfield and General
Mills did not have the same interest in the underlying litigation and were not
privies.
We decline to decide this dispute. Whether parties were in privity is a factual
question that should be decided in the first instance by the district court. See Salve
Regina Coll. v. Russell, 499 U.S. 225, 233 (1991) (explaining that the “institutional
advantage[]” of a district court is its “unchallenged superiority . . . [in]
factfinding”); Hart v. Yamaha-Parts Distribs., Inc., 787 F.2d 1468, 1472 (11th Cir.
1986) (“[P]rivity . . . is a factual question which should not be reversed unless its
determination is clearly erroneous.”). We remand for the district court to determine
whether collateral estoppel bars the complaint of CSX for indemnification.
We also decline to decide the alternative argument raised by CSX, whether
the Sidetrack Agreement requires indemnification assuming CSX was solely at
fault. The district court, as CSX argues, construed the Sidetrack Agreement under
the premise that collateral estoppel as defined by federal law precludes relitigation
of the negligence of General Mills. The district court should have the first
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opportunity to decide the predicate question of privity, so we do not resolve this
alternative argument.
IV. CONCLUSION
We REVERSE and REMAND for proceedings consistent with this opinion.
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