The US Supreme Court heard oral arguments in two cases Monday, the first conducted in 2020.
The first case, Lucky Brand Dungarees v. Marcel Fashions Group, asks whether, when a plaintiff raises new claims, a defendant can raise new defenses that were not actually litigated in any prior cases between the parties.
The US Court of Appeals for the Second Circuit barred Lucky from raising as a defense the settlement agreement they entered into with Marcel in 2003 under the doctrine of res judicata, since Lucky had failed to raise that defense during a subsequent lawsuit in 2005. Specifically, the court emphasized the term “defense preclusion,” arguing that the res judicata precludes assertions of previously available defenses in addition to issue preclusion and claim preclusion.
Lucky argues that the concept of defense preclusion does not fit into res judicata, which they claim only provides for issue and claim preclusion. According to Lucky, it is therefore an invention of the Court without a basis in Civil jurisprudence. In addition, Lucky contends that defense preclusion does not make sense in the current case as Marcel is raising different claims than in the prior case.
The second, Thole v. US Bank, asks whether a participant in a defined-pension fund that meets minimum-funding criteria can sue the fund managers when he has not actually suffered a financial injury.
The US Court of Appeals for the Eighth Circuit ruled that because the benefit plan at issue is currently overfunded, the plan’s beneficiaries have no standing to sue for breach of fiduciary duties as they do not suffer an “actual injury” when a plan’s losses erode only a surplus caused by overfunding.
Thole and fellow petitioner Smith assert that whether the plan is overfunded is irrelevant, because participants in the plan have an equitable interest in plan assets, analogous to trust beneficiaries. Therefore any breach of fiduciary duties of loyalty and prudent investment give rise to a concrete injury regardless.
During the oral arguments stage the nine Justices will ask questions directly to attorneys of both parties, allowing them to highlight arguments they view as important.
