PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
ROBERT P. SARTIN, SR.; ROBERT P.
SARTIN, JR.; MARIE M. MCGINNESS
SARTIN; TED GRIFFIN; G. DONALD
LAYNO; JOHN MICHAEL WILSON;
RONALD FRAHM; SHARON FRAHM;
DOUG CLINE; EDWARD L. SARTIN;
EDWARD A. SARTIN; CHRISTOPHER T.
SARTIN; SARTIN SERVICES, No. 07-1464
INCORPORATED; RICHARD SARTIN,
Plaintiffs-Appellees,
v.
JOHN D. MACIK,
Defendant-Appellant.
Appeal from the United States District Court
for the Western District of North Carolina, at Charlotte.
Frank D. Whitney, District Judge.
(3:06-cv-00075)
Argued: May 15, 2008
Decided: July 28, 2008
Before WILLIAMS, Chief Judge, and MICHAEL
and MOTZ, Circuit Judges.
Reversed and remanded by published opinion. Judge Motz wrote the
opinion, in which Judge Michael joined. Chief Judge Williams wrote
a dissenting opinion.
2 SARTIN v. MACIK
COUNSEL
ARGUED: Bradley Eli Pearce, KATTEN, MUCHIN & ROSEN-
MAN, LLP, Charlotte, North Carolina, for Appellant. Benjamin D.
Overby, VERNON, VERNON, WOOTEN, BROWN, ANDREWS &
GARRETT, PA, Burlington, North Carolina, for Appellees. ON
BRIEF: E. Lawson Brown, Jr., VERNON, VERNON, WOOTEN,
BROWN, ANDREWS & GARRETT, PA, Burlington, North Caro-
lina, for Appellees.
OPINION
DIANA GRIBBON MOTZ, Circuit Judge:
In this case, we confront a question of North Carolina law that the
state courts have yet to address. We must determine whether a state
default judgment, entered as a penalty for a party’s failure to comply
with a North Carolina court’s discovery order, has collateral estoppel
effect in subsequent litigation in bankruptcy court. The bankruptcy
court, in a decision upheld by the district court, found that the North
Carolina courts would give collateral estoppel effect to the default
judgment. For the reasons that follow, we disagree and therefore
reverse the judgment of the district court and remand for further pro-
ceedings.
I.
John D. Macik, John Adalio, James Coffin, and Negotiation Plus
Sports Management, Ltd., together founded TeamDriver.com, Inc., an
internet-based business intended to become "the multi-media connec-
tion between motorsports celebrities, drivers, teams and the racing
fan." They hoped that the TeamDriver.com website would grow to
accommodate on-line photo galleries, chat areas, a racing retail store,
an on-line auction house, and eventually live video and audio feeds
providing behind-the-scenes access to races, including "helmet/hat
cams" and "wide-angle tool box cams." They also intended to estab-
lish an on-line auction site in partnership with eBay that would allow
racing teams to "liquidate their used and damaged racing parts and
SARTIN v. MACIK 3
one-of-a-kind team items" to eagerly awaiting racing fans. In an effort
to generate investment in TeamDriver.com, Macik and the others cir-
culated documents to potential investors describing their plans for
developing the site, the proposed structure of the organization, and
profit and loss projections based on itemized predictions of revenue,
operating expenses, and set-up expenses.
On the basis of these proposals, Macik and the others successfully
solicited a total of $213,200 from a number of investors, including the
appellees in this case, Robert P. Sartin, Sr., Robert P. Sartin, Jr.,
Marie M. McGinness Sartin, Ted Griffin, G. Donald Layno, John
Michael Wilson, Ronald Frahm, Sharon Frahm, Doug Cline, Edward
L. Sartin, Edward A. Sartin, Christopher T. Sartin, Sartin Services,
Inc., and Richard Sartin (collectively, "the Sartins"). The Sartins lost
their investment, however, when the business failed shortly after
TeamDriver.com’s inception.
Alleging that Macik used the funds invested in TeamDriver.com
for personal purposes, the Sartins brought an action against Macik in
state court in Guilford County, North Carolina. The Sartins alleged
breach of fiduciary duty, constructive fraud, fraud, negligence and
gross negligence, breach of contract, misappropriation and conversion
of funds, misrepresentation, and unfair and deceptive trade practices.
Although Macik answered the Sartins’ complaint, he failed to respond
to interrogatories and requests for production of documents, despite
the state court’s order compelling discovery. When Macik then did
not appear for a hearing, the state court found that he had willfully
failed to comply with the discovery order and that this failure entitled
the Sartins to judgment by default. On March 4, 2004, the court struck
Macik’s answer and awarded the Sartins $213,200 in actual damages,
which the court then trebled to $639,600 under the state’s unfair and
deceptive trade practices statute, and costs and attorneys fees. The
Sartins attempted to execute the judgment against Macik but were
unsuccessful.
In June 2005, Macik and his wife, Paula C. Macik, filed a volun-
tary Chapter 7 bankruptcy petition. The Sartins brought an adversary
proceeding in that bankruptcy action, seeking to have the state court
judgment against Macik declared nondischargeable in bankruptcy
pursuant to 11 U.S.C. § 523(a) (2000). That section of the Bankruptcy
4 SARTIN v. MACIK
Code provides that a discharge in bankruptcy does not extend to cer-
tain kinds of debts, including those "for money . . . obtained by . . .
false pretenses, a false representation, or actual fraud," "for fraud . . .
while acting in a fiduciary capacity," and "for willful and malicious
injury by the debtor to . . . the property of another." Id. § 523(a)(2),
(4), (6).
The bankruptcy court found, and the district court agreed, that the
state court default judgment for the Sartins against Macik had collat-
eral estoppel effect, barring Macik from arguing in the bankruptcy
court that § 523(a)(2), (4), and (6) did not apply to his debt to the Sar-
tins. The bankruptcy court thus held that the debt arising from the
state court judgment was nondischargeable, and the district court
affirmed that decision.1 "We review the judgment of a district court
sitting in review of a bankruptcy court de novo, applying the same
standards of review that were applied in the district court." Three Sis-
ters Partners, L.L.C. v. Harden (In re Shangra-La, Inc.), 167 F.3d
843, 847 (4th Cir. 1999).
II.
Federal courts must give the same preclusive effect to a state court
judgment as the forum that rendered the judgment would have given
it. See Allen v. McCurry, 449 U.S. 90, 96 (1980); Pahlavi v. Ansari
(In re Ansari), 113 F.3d 17, 19 (4th Cir. 1997). Therefore, to deter-
mine the preclusive effect of the state default judgment against
Macik, we must apply North Carolina law.
1
In the alternative, the bankruptcy court held that Macik’s debt to the
Sartins was nondischargeable because "the Rooker-Feldman doctrine"
barred Macik from asserting defenses that were "elements of the underly-
ing state law claims." But as the Supreme Court made clear in Exxon
Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280, 284 (2005),
the Rooker-Feldman doctrine only bars collateral attacks on state court
judgments; it does not supplant the normal rules of preclusion. Macik
does not seek to have the default judgment on his state law claims over-
turned, so the Rooker-Feldman doctrine does not apply. Instead the rules
of preclusion govern whether a litigant may, in a bankruptcy proceeding,
revisit an issue previously addressed in a state court action. Id. at 291-93;
see also Davani v. Va. Dep’t. of Transp., 434 F.3d 712, 718-19 (4th Cir.
2006).
SARTIN v. MACIK 5
Preclusion doctrine encompasses two strands: res judicata and col-
lateral estoppel. Res judicata, or claim preclusion, bars the relitigation
of any claims that were or could have been raised in a prior proceed-
ing between the same parties. See Thomas M. McInnis & Assocs., Inc.
v. Hall, 349 S.E.2d 552, 556-57 (N.C. 1986). Neither party contends
that the case at hand involves res judicata.
Rather, the preclusion doctrine relevant to the present case is col-
lateral estoppel, or issue preclusion, which bars the relitigation of spe-
cific issues that were actually determined in a prior action. See id.2 In
order to assert collateral estoppel under North Carolina law, a party
must show that the issue in question was identical to an issue actually
litigated and necessary to the judgment, that the prior action resulted
in a final judgment on the merits, and that the present parties are the
same as, or in privity with, the parties to the earlier action. See id. at
557. North Carolina courts have abandoned the final requirement of
"mutuality of estoppel" for the defensive use of collateral estoppel, so
long as the party seeking to reopen the issue "had a full and fair
opportunity to litigate" the matter in the previous action. See id. at
560.
As to the first requirement — that the issue in question was identi-
cal to an issue actually litigated and necessary to the judgment — the
Supreme Court of North Carolina has held that parties must satisfy
four additional criteria:
(1) the issues must be the same as those involved in the prior
action, (2) the issues must have been raised and actually liti-
gated in the prior action, (3) the issues must have been
material and relevant to the disposition of the prior action,
and (4) the determination of the issues in the prior action
2
Many federal courts and the Restatement (Second) of Judgments "pre-
fer[ ] to substitute the terms ‘claim preclusion’ (rather than res judicata)
and ‘issue preclusion’ (rather than collateral estoppel)." Hall, 349 S.E.2d
at 556 n.1. Because North Carolina courts generally use the traditional
terms "res judicata" and "collateral estoppel," we use those terms
throughout this opinion, even when referring to the Restatement’s analy-
sis.
6 SARTIN v. MACIK
must have been necessary and essential to the resulting
judgment.
State v. Summers, 528 S.E.2d 17, 20 (N.C. 2000) (emphasis added)
(citing King v. Grindstaff, 200 S.E.2d 799, 806 (N.C. 1973)).
This case presents the question of whether a North Carolina court
would hold that issues resolved in a default judgment have been "ac-
tually litigated" for purposes of that judgment and so carry collateral
estoppel effect in subsequent litigation. As the parties acknowledge,
the Supreme Court of North Carolina has never resolved, or directly
addressed, this question.
The Supreme Court of North Carolina has, however, clearly stated
on several occasions that it follows "traditional" formulations of res
judicata and collateral estoppel. See Whitacre P’ship v. Biosignia,
Inc., 591 S.E.2d 870, 880 (N.C. 2004) (stating that "North Carolina
recognizes both doctrines as traditionally formulated"); Hall, 349
S.E.2d at 557 ("North Carolina currently recognizes both doctrines in
their traditional guise."). Indeed, as recently as 2004, the Supreme
Court of North Carolina explicitly noted that the only respect in
which it has chosen to depart from the traditional rules of collateral
estoppel is to "abandon[ ] the strict ‘mutuality of estoppel’ require-
ment for defensive uses of collateral estoppel." Whitacre P’ship, 591
S.E.2d at 880.3
Moreover, the Supreme Court of North Carolina has relied upon
section 27 of the Restatement when defining "collateral estoppel as
[that doctrine was] traditionally applied." See Hall, 349 S.E.2d at 557.
Section 27 provides that "[w]hen an issue of fact or law is actually
3
As the Supreme Court noted in Blonder-Tongue Laboratories, Inc. v.
University of Illinois Foundation, 402 U.S. 313, 320-27 (1971), the
mutuality requirement has been under attack since at least 1936. By the
time the Court issued Blonder-Tongue in 1971, many state and federal
courts had already "rejected the mutuality requirement," especially for
the defensive assertion of collateral estoppel. See id. at 324. In 1986,
North Carolina joined "[t]he modern trend" by "abandon[ing] the
requirement of mutuality" for defensive uses of collateral estoppel. See
Hall, 349 S.E.2d at 559-60; Whitacre P’ship, 591 S.E.2d at 880.
SARTIN v. MACIK 7
litigated and determined by a valid and final judgment, and the deter-
mination is essential to the judgment, the determination is conclusive
in a subsequent action between the parties, whether on the same or a
different claim." Restatement (Second) of Judgments § 27 (1982).
The comments to section 27 explain, however, that "[i]n the case of
a judgment entered by confession, consent, or default, none of the
issues is actually litigated. Therefore, the rule of this Section does not
apply with respect to any issue in a subsequent action." Restatement
(Second) of Judgments § 27 cmt. e (1982) (emphasis added). Notably,
the Restatement’s approach with respect to collateral estoppel differs
from the traditional rule it articulates for res judicata because a default
judgment involving the same claim does have preclusive effect in a
subsequent action. See Restatement (Second) of Judgments § 17 cmt.
d (1982).
Thus, under the Restatement, default judgments do not possess col-
lateral estoppel effect, even though they do possess res judicata effect.
Other authoritative sources confirm that the Restatement accurately
describes the traditional rule that default judgments have no collateral
estoppel effect, while acknowledging that some courts have created
exceptions to this traditional rule. See 18 James Wm. Moore et al.,
Moore’s Federal Practice § 132.03[2][k] (3d ed. 2008); 50 C.J.S.
Judgments § 797 (2008); 18A Charles Alan Wright, Arthur R. Miller,
& Edward H. Cooper, Federal Practice and Procedure § 4440 (2d ed.
2002); 47 Am. Jur. 2d Judgments § 542 (2008).
In sum, the Supreme Court of North Carolina has indicated both
that it follows the traditional rule for collateral estoppel and that it
views the Restatement as presenting this rule. Thus, as we have previ-
ously noted in dicta, North Carolina courts have continued to adhere
to the traditional view "that a default judgment cannot be used for col-
lateral estoppel purposes." Ansari, 113 F.3d at 22 (internal quotation
marks and alterations omitted). As a federal court applying North
Carolina law, we accordingly hold that under that state’s law, the
default judgment against Macik is not entitled to collateral estoppel
effect in the subsequent bankruptcy proceeding.
III.
In holding to the contrary, the bankruptcy court and the district
court relied on inapplicable precedent and conflated two of the
requirements for collateral estoppel.
8 SARTIN v. MACIK
The bankruptcy court noted our dicta in Ansari, but citing Cassell
v. United States, 348 F. Supp. 2d 602, 605 (M.D.N.C. 2004), it con-
cluded that North Carolina law had evolved to accord collateral estop-
pel effect to default judgments. In Cassell a district court sitting in
North Carolina did give a default judgment collateral estoppel effect,
but in that case the court applied federal preclusion law, not North
Carolina law. The bankruptcy court also relied on two other cases in
which courts applied federal preclusion law, Bush v. Balfour Beatty
Bahamas, Ltd. (In re Bush), 62 F.3d 1319, 1323 & n.6 (11th Cir.
1995), and FDIC v. Daily (In re Daily), 47 F.3d 365, 368 (9th Cir.
1995), and a third case in which the court looked to Texas, rather than
North Carolina, preclusion law, Gober v. Terra + Corp. (In re
Gober), 100 F.3d 1195, 1201-02, 1204-06 (5th Cir. 1996).
In reviewing the bankruptcy court’s decision, the district court sim-
ilarly relied on inapplicable precedent. The court found it persuasive
that North Carolina courts had given preclusive effect to default judg-
ments in Holly Farm Foods, Inc. v. Kuykendall, 442 S.E.2d 94, 97-98
(N.C. Ct. App. 1994), and Naddeo v. Allstate Insurance Co., 533
S.E.2d 501, 505-07 (N.C. Ct. App. 2000). Both cases, however,
merely held a default judgment to be res judicata in a subsequent pro-
ceeding, which of course simply conforms to the traditional rule set
forth in the Restatement that default judgments do possess preclusive
effect for res judicata purposes.4 See Restatement (Second) of Judg-
ments § 17 cmt. d (1982). Neither Holly Farms nor Naddeo holds that
an issue decided via a default judgment has been actually litigated or
is entitled to preclusive effect for collateral estoppel purposes.
The district court also reasoned, and the Sartins argue on appeal,
that the default judgment should be given collateral estoppel effect
because Macik had a "full and fair opportunity to litigate" the issue
before the state court. This argument mistakenly conflates two sepa-
rate requirements for collateral estoppel. Like other states, North Car-
olina has adopted the rule that a previous judgment has collateral
4
Naddeo also found that certain issues became the law of the case
while others were waived. See 533 S.E.2d at 507. Although the defen-
dant in Naddeo raised both res judicata and collateral estoppel as
defenses, the court based its holding on res judicata and law of the case.
See id. at 506-07.
SARTIN v. MACIK 9
estoppel effect only when, first, the specific issue was actually liti-
gated in the prior action, see e.g., Hall, 349 S.E.2d at 557, and, sec-
ond, the party seeking to relitigate previously enjoyed a "full and fair
opportunity to litigate" the issue, even if that party chose not to do so,
see id. at 559-60; Miller Bldg. Corp. v. NBBJ N.C., Inc., 497 S.E.2d
433, 435 (N.C. Ct. App. 1998) (citing Hall, 349 S.E.2d at 557, 560).
Although the two requirements initially sound similar, the "actual
litigation" requirement concerns the issues at stake, while the "oppor-
tunity to litigate" requirement concerns the parties affected. The latter
requirement emerged in response to the modern trend relaxing strict
mutuality. Whereas, formerly, the parties in both the previous and
present suits had to be identical to, or in privity with, one another for
collateral estoppel to apply, see Hall, 349 S.E.2d at 557, now individ-
uals not party to the initial suit may assert issue preclusion in some
circumstances. See id. at 559-60 (applying the "opportunity to liti-
gate" requirement to the defensive use of collateral estoppel); see also
Rymer v. Estate of Sorrells, 488 S.E.2d 838, 840 (N.C. Ct. App. 1997)
(extending the "opportunity to litigate" requirement to the offensive
use of collateral estoppel); Restatement (Second) of Judgments §§ 27,
29 (1982) (setting forth in section 27 the requirement that an issue be
"actually litigated" for collateral estoppel to apply and explaining in
section 29 that collateral estoppel may apply in suits involving indi-
viduals not party to the original suit "unless" the party seeking to reli-
tigate "lacked full and fair opportunity to litigate the issue in the first
action"). In the present case, no one disputes that the parties are iden-
tical in both actions; the only issue is whether the default judgment
satisfies the separate "actual litigation" requirement for issues.
Nothing in Hall or subsequent North Carolina cases indicates that
the requirement that parties be afforded an "opportunity to litigate"
has replaced the requirement that issues must have been "actually liti-
gated" in the prior proceeding.5 Rather, since Hall, both the Supreme
5
In fact, Hall itself illustrates the continued relevance of both require-
ments. In Hall, the Supreme Court of North Carolina first found that the
"actual litigation" requirement had been met, but that the mutuality of
estoppel requirement was unsatisfied. 349 S.E.2d at 557-58. The court
then declined to require mutuality between the parties because the party
against whom collateral estoppel was asserted had enjoyed a full and fair
opportunity to litigate in the initial forum. Id. at 560.
10 SARTIN v. MACIK
Court of North Carolina and lower state courts have continued to
articulate and apply the "actual litigation" requirement when resolving
questions regarding collateral estoppel. See, e.g., Beckwith v. Llewel-
lyn, 391 S.E.2d 189, 191 (N.C. 1990); Bluebird Corp. v. Aubin, 657
S.E.2d 55, 61-62 (N.C. Ct. App. 2008); Gregory v. Penland, 634
S.E.2d 625, 631-32 (N.C. Ct. App. 2006).
We recognize that good policy reasons would seem to support a
holding that gives collateral estoppel effect to at least some default
judgments. Judgments like the present one, which result from the
deliberate abuse of the judicial process, seem to merit preclusive
effect. Were we deciding this case as a matter of federal common law,
such considerations might well be dispositive. But however wise such
a rule may be, we may not apply it in this case absent some indication
from the North Carolina courts that they would also adopt this
approach. And we have no such indication here.6
IV.
For the foregoing reasons, we reverse the judgment of the district
court and remand to the district court with instructions to remand to
the bankruptcy court for further proceedings consistent with this opin-
ion. Of course, on remand, the bankruptcy court may independently
determine — if so asked by the Sartins — that the Macik’s debt is
nondischargeable under 11 U.S.C. § 523(a). The court may not, how-
ever, rely on the asserted collateral estoppel effect of the state default
judgment to reach this conclusion.
REVERSED AND REMANDED
6
A certification process would greatly facilitate the resolution of unre-
solved questions of state law like the present one by ensuring the correct
legal outcome, aiding in judicial economy, and manifesting proper
respect for federalism. See e.g., Lehman Bros. v. Schein, 416 U.S. 386,
391 (1974); Clay v. Sun Ins. Office Ltd., 363 U.S. 207, 212 (1960).
Unfortunately, the State of North Carolina has not yet adopted such a
process.
SARTIN v. MACIK 11
WILLIAMS, Chief Judge, dissenting:
Until today, courts addressing the collateral-estoppel, or preclusive,
effect of a default judgment entered as a sanction for refusal to com-
ply with discovery orders have uniformly refused to give parties that
have abused a prior judicial process a second bite at the apple. I dis-
agree with the majority’s conclusion that the Supreme Court of North
Carolina, if presented with the question, would be the first to reach
a contrary result. In my view, the majority errs in seizing on prefatory
language in two North Carolina decisions indicating that North Caro-
lina applies the doctrine of collateral estoppel in its traditional form
— except where it has opted not to do so by embracing the modern
trend of abandoning the strict "mutuality of estoppel" requirement —
and treating it as dispositive of the issue before us. Rather, a fair read-
ing of North Carolina law suggests that a party who begins litigating
an issue but ultimately forestalls its resolution on the merits by refus-
ing to comply with discovery orders is collaterally estopped from reli-
tigating that same issue. Accordingly, I respectfully dissent.1
I.
Whether the doctrine of collateral estoppel precludes Macik from
contesting issues underlying the state-court default judgment presents
a legal question that we review de novo in his on-going bankruptcy
proceeding. See In re Duncan, 448 F.3d 725, 728 (4th Cir. 2006)
(explaining that because "[w]e review the judgment of a district court
sitting in review of a bankruptcy court de novo, applying the same
1
I agree with the majority that the Rooker-Feldman doctrine does not
bar Macik from asserting defenses to Appellees’ claim that debt arising
from the North Carolina state court judgment is nondischargeable. The
Supreme Court has made clear that the Rooker-Feldman doctrine "is con-
fined to cases of the kind from which the doctrine acquired its name:
cases brought by state-court losers complaining of injuries caused by
state-court judgments rendered before the district court proceedings com-
menced and inviting district court review and rejection of those judg-
ments." Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280,
284 (2005). It does not "otherwise override or supplant preclusion doc-
trine or augment the circumscribed doctrines that allow federal courts to
stay or dismiss proceedings in deference to state-court actions." Id.
12 SARTIN v. MACIK
standards of review that were applied in the district court," we "re-
view findings of fact for clear error and questions of law de novo").
We have an obligation to afford "full faith and credit" to state acts
and judicial proceedings. 28 U.S.C.A. § 1738 (West 2006). Accord-
ingly, in deciding the preclusive effect of a state-court judgment, we
must look to the law of the state that rendered the judgment to deter-
mine whether the courts of that state would afford the judgment pre-
clusive effect. In re Ansari, 113 F.3d 17, 19 (4th Cir. 1997). Because
the judgment here originated in North Carolina, we apply North Caro-
lina’s law of collateral estoppel.
In applying North Carolina law, we treat the decisions of the state’s
highest court, the Supreme Court of North Carolina, as controlling. If
the Supreme Court of North Carolina has not yet resolved an issue,
we must offer our best judgment about what that court would do. In
so doing, "we may of course consider all of the authority that the state
high court[ ] would, and we should give appropriate weight to the
opinions of [the state’s] intermediate appellate courts." Food Lion,
Inc. v. Capital Cities/ABC, Inc., 194 F.3d 505, 512 (4th Cir. 1999);
see also Castillo v. Emergency Med. Assocs., P.A., 372 F.3d 643, 648
(4th Cir. 2004) ("When there is no decision by the highest state court,
a federal court must apply what it finds to be the state law after giving
proper regard to relevant rulings of other courts of the State." (internal
quotation marks and alteration omitted)).
The Supreme Court of North Carolina recognizes the doctrine of
collateral estoppel "as traditionally formulated." Whitacre P’ship v.
Biosignia, Inc., 591 S.E.2d 870, 880 (N.C. 2004). Thus, it requires
parties seeking to preclude relitigation of an issue to satisfy the same
elements traditionally required for collateral estoppel to apply:
(1) the issues must be the same as those involved in the prior
action, (2) the issues must have been raised and actually liti-
gated in the prior action, (3) the issues must have been mate-
rial and relevant to the disposition of the prior action, and
(4) the determination of the issues in the prior action must
have been necessary and essential to the resulting judgment.
SARTIN v. MACIK 13
2
State v. Summers, 528 S.E.2d 17, 20 (N.C. 2000); cf., e.g., Restate-
ment (Second) of Judgments § 27 (1982) ("When an issue of fact or
law is actually litigated and determined by a valid and final judgment,
and the determination is essential to the judgment, the determination
is conclusive in a subsequent action between the parties whether on
the same or a different claim."). North Carolina has, however, "fol-
lowed the modern trend in abandoning the strict ‘mutuality of estop-
pel’ requirement [(the requirement that both parties be bound by the
prior judgment)] for defensive uses of collateral estoppel." Whitacre
P’ship, 591 S.E.2d at 880.3
The Supreme Court of North Carolina has not yet spoken to the
question presented in this case. We, however, have previously applied
North Carolina’s law of collateral estoppel in the default-judgment
context, holding in In re Raynor, 922 F.2d 1146 (4th Cir. 1991), that
a default judgment entered after one party failed to appear did not
have preclusive effect in a subsequent proceeding because the issues
in the case had not been actually litigated. See In re Raynor, 922 F.2d.
at 1149 (explaining that "an indispensible requirement of . . . issue
preclusion or collateral estoppel[ ]is actual litigation of the issue,"
which had not occurred because Raynor had not been aware of the
proceeding). Thus, the narrow question facing us is whether the same
result obtains where, as here, a party commences litigation but ulti-
mately frustrates the resolution of an issue’s merits by refusing to
comply with discovery orders.
Macik argues, and the majority agrees, that the Supreme Court of
2
The majority mistakenly treats State v. Summers, 528 S.E.2d 17, 20
(N.C. 2000), as imposing "additional criteria" supplementing the require-
ment, outlined in Thomas M. McInnis & Assocs., Inc. v. Hall, 349 S.E.2d
552 (N.C. 1986), that the issue in question be identical to an issue actu-
ally litigated and necessary to the judgment. Majority Op. at 5. Plainly,
Summers simply uses a slightly different format to describe the same ele-
ments outlined in Hall.
3
The majority emphasizes that the Supreme Court of North Carolina
has not explicitly embraced any other "depart[ure] from the traditional
rules of collateral estoppel." Majority Op. at 6. Given that no other "mod-
ern trends" appear to have been presented for that court’s consideration,
however, its silence on this front is hardly deafening.
14 SARTIN v. MACIK
North Carolina would decide this question in keeping with the general
rule expressed by comment e to Section 27 of the Restatement of
Judgments that "[i]n the case of a judgment entered by confession,
consent, or default, none of the issues is actually litigated." Restate-
ment 2d Judgments § 27 cmt. e. Because this conclusion stretches the
language of the Restatement too far, I disagree.
The Restatement expressly contemplates only four circumstances
giving rise to "issues which might have been but were not litigated
and determined in [a] prior action": (1) when "the defendant might
have interposed [the issue] as an affirmative defense but failed to do
so"; (2) when the issue "is raised by a material allegation of a party’s
pleading but is admitted (explicitly or by virtue of a failure to deny)
in a responsive pleading"; (3) when the issue "is raised in an allega-
tion by one party and is admitted by the other before evidence on the
issue is adduced at trial"; and (4) when the issue "is the subject of a
stipulation between the parties." Restatement 2d Judgments § 27 cmt.
e. It explains that applying collateral estoppel in these circumstances
could "serve to discourage compromise, to decrease the likelihood
that the issues in an action would be narrowed by stipulation, and thus
to intensify litigation." Id. Further articulating the policy consider-
ations underlying the "actual litigation" requirement, the Restatement
notes that "[t]here are many reasons why a party may choose not to
raise an issue, or to contest an assertion, in a particular action," such
as an inconvenient forum or a minimal amount in controversy; in
addition, the interests underlying the preclusion doctrine — conserv-
ing judicial resources, maintaining consistency, and avoiding harass-
ment — "are less compelling when the issue on which preclusion is
sought has not actually been litigated before." Id. The Restatement
does not specifically address whether an issue should be considered
"actually litigated" if a party commences litigation and declines to fol-
low through on its contentions without abandoning its adversarial
posture. It does, however, acknowledge the possibility that "even if
[an issue] was not litigated, the party’s reasons for not litigating in the
prior action may be such that preclusion would be appropriate." Id.
This concession, in my view, shows that the Restatement view is not
necessarily a bar to the application of collateral estoppel in this case.
Moreover, in addition to the Restatement, the Supreme Court of
North Carolina might well seek guidance in the decisions of other
SARTIN v. MACIK 15
jurisdictions. In so doing, it would find that every federal circuit court
to consider the question has held that a default judgment entered as
a sanction for refusal to comply with discovery orders has preclusive
effect. See In re Ansari, 113 F.3d 17, 19 (4th Cir. 1997) (applying
Virginia law); In re Docteroff, 133 F.3d 210, 215 (3d Cir. 1997) (fed-
eral law); In re Gober, 100 F.3d 1195, 1203-05 (5th Cir. 1996) (Texas
law); In re Bush, 62 F.3d 1319, 1323-25 (11th Cir. 1995) (federal
law); In re Daily, 47 F.3d 365, 368-69 (9th Cir. 1995) (federal law).
In each case, these courts "d[id] not hesitate in holding that a party
. . . who deliberately prevents resolution of a lawsuit[ ] should be
deemed to have actually litigated an issue for purposes of collateral
estoppel application." In re Docteroff, 133 F.3d at 215.
Indeed, the most analogous North Carolina precedent on point,
Thomas M. McInnis & Assocs., Inc. v. Hall, 349 S.E.2d 552 (N.C.
1986), suggests that the Supreme Court of North Carolina would
prove no more hesitant in this regard. Although Macik argues that an
issue cannot be deemed actually litigated without a judgment on the
merits, the Hall court did not take a particularly strict view of "actual
litigation." Instead, the Hall court held that an issue — entitlement to
prejudgment interest — was actually litigated in a prior action where
the plaintiff raised the issue in its pleadings and to the judge after the
jury verdict, but the judge determined that it was an issue of fact that
had been waived because the plaintiff had not requested that it be sub-
mitted to the jury. Id. at 557-58. The Hall majority reached this con-
clusion despite criticism from two justices, both of whom argued in
a separate concurring opinion that the absence of a decision on the
merits of the entitlement issue posed a bar to the application of collat-
eral estoppel. Id. at 561-64 (Billings, C.J., concurring). The concur-
rence argued that the issue was not actually litigated because it was
never determined that the plaintiff was not entitled to prejudgment
interest, only that she had waived any right recover it. Id. at 562 (Bil-
lings, C.J., concurring). This contention, however, did not persuade a
majority of the court.
Finally, there is no indication that, unlike the majority in this case
and the other courts to consider this issue, the Supreme Court of
North Carolina would prove unmoved by the "good policy reasons,"
Majority Op. at 10, supporting application of collateral estoppel in
16 SARTIN v. MACIK
4
this instance. In my view, North Carolina’s high court would be no
less reluctant to "encourage behavior similar to [Macik’s] and give lit-
igants who abuse the processes and dignity of the court an undeserved
second bite at the apple." Docteroff, 133 F.3d at 215.
II.
For the foregoing reasons, I respectfully dissent from the majority’s
decision to reverse the district court’s collateral estoppel ruling and
remand for further proceedings.
4
The majority volunteers that it would likely reach a different result if
left to its own devices. See Majority Op. at 10 (explaining that the "good
policy reasons [that] would seem to support a holding that gives collat-
eral estoppel effect to at least some default judgments . . . might well be
dispositive").