The primary objective of the present article is to draw attention to the drawbacks of preclusion, especially of the rules of cause of action estoppel. The article challenges the traditional assumption that the rule of cause of action estoppel increases efficiency by introducing some economic and behavioural effects of the rule, especially the effects of the rule against splitting a single claim or cause of action.
Analysis of the effects of cause of action estoppel has three major methodological goals: (a) to re-examine the rule in light of the behaviour modification model, (b) to evaluate the economic efficiency of the rule and its effect on the cost of litigation, and (c) to consider the influence of the rule on the chances of reaching a settlement.
The article discusses the problematic incentives of litigating parties under the current Anglo-American rule of cause of action estoppel, and some of its harmful effects on the conduct and cost of litigation as well as on the chances of reaching a settlement. The article shows that, in many cases, the cause of action estoppel rules have undesirable effects on the conduct of litigation, including stimulating overlitigation in the initial action. Furthermore, the rule against splitting a single cause of action does not always contribute to an economically efficient legal system, and reduces the chances of reaching a settlement, which has a harmful effect on both the economic and behavioural aspects of litigation. By contrast, allowing the splitting of a single cause of action can significantly increase the litigants’ incentives to settle, providing the parties with opportunities for employing useful settlement strategies.
L’objectif principal de cet article est d’attirer l’attention sur les inconvénients de la préclusion, surtout en ce qui a trait aux règles entourant l’irrecevabilité résultant de l’identité des causes d’actions (IRICA). Cet article remet en question le postulat traditionnel selon lequel la règle de l’IRICA augmente l’efficacité en introduisant des effets économiques et comportementaux, surtout ceux qui interdisent la scission d’une seule demande ou cause d’action. L’analyse des effets de la règle de l’IRICA comporte trois objectifs méthodologiques principaux : (a) réexaminer la règle à la lumière du modèle des effets sur le comportement, (b) évaluer l’efficience économique de la règle et de ses effets sur le coût des litiges et (c) étudier l’influence de la règle sur les chances d’en arriver à un règlement hors cour.
Cet article aborde les problèmes rattachés aux incitatifs des parties en litige sous la règle anglo-américaine de l’IRICA actuelle, ainsi que certains des effets néfastes de la règle sur la conduite et les coûts du litige et sur les chances d’en arriver à un règlement hors cour. L’auteur démontre que dans de nombreux cas, les règles entourant l’IRICA ont des effets indésirables sur le déroulement des litiges, y compris les procédures excessives lors de l’action initiale. De plus, la règle interdisant la scission d’une même cause d’action ne contribue pas toujours à augmenter l’efficience économique du système juridique et réduit les chances d’en arriver à un règlement hors-cour, ce qui nuit tant à l’aspect économique que comportemental du litige. Par contre, le fait de permettre la scission d’une même cause d’action peut augmenter de façon significative les incitatifs des parties pour s’entendre sur un règlement hors cour, leur donnant des occasions d’utiliser des stratégies de règlement utiles.
There are legal barriers for relitigation created in final judgments, represented by the rules of res judicata, “a matter that has been adjudicated.” A classical common law doctrine, res judicata (RJ) is applied in the legal systems of England, the United States, and Canada. However despite these legal barriers to relitigation, an opinion exists that the doctrine of RJ is a necessary “product of the adversary system of litigation,” and that “[o]ur legal system could not exist without res judicata.” Many have shown that “every legal system has produced a body of res judicata law,” and made unequivocal statements to that effect.
In an earlier article I challenged some of these assumptions by presenting a comparative analysis of RJ and showing that some legal systems do not accept the main tenets of RJ. Furthermore, I demonstrated that there are good reasons for rejecting RJ, and that the rules of RJ raise many difficulties and have numerous drawbacks. For the purpose of furthering my argument, much of the beginning and subsequent framework of this article is heavily related to my previous article—which should help to situate this article within the pretences of that piece.
The primary objective of the present article is to draw attention to some behavioural and economic effects of the rule of cause of action estoppel in civil actions. According to the rule of cause of action estoppel, litigants are barred from pressing their suit if the cause of action touches upon a matter that has been adjudicated in a previous proceeding. In other words, a party may not ordinarily assert a civil action arising from a transaction for which it has already prosecuted such a cause of action, whether or not the two lawsuits entirely correspond to each other. Cause of action estoppel is also “referred to as ‘the rule against splitting a [single] cause of action’.” A plaintiff who asserts only part of a single cause of action is said to have split the cause of action, and cause of action estoppel prevents the subsequent assertion of the remainder. In the present article I focus on the effects of cause of action estoppel, especially on the effects of the rule against splitting a single cause of action on the conduct of litigation, on the cost of litigation, and on the chances of reaching a settlement.
The rule of cause of action estoppel and the rule against splitting a single cause of action are considered by many as a fundamental contribution to the efficiency of judicial proceedings. Robert C. Casad, one of the leading scholars of RJ, emphasizes this point:
Modern procedure seeks to maximize the efficiency of judicialproceedings by encouraging the presentation of all claims that canconveniently be tried together in the framework of a single lawsuit.
This traditional approach assumes that an efficient judicial system shouldseek to include all actions and remedies in a single cause of action.
The present article challenges the traditional assumption by introducing some of the economic and behavioural effects of the rule of cause of action estoppel, which have not been considered in earlier studies. Note that this article does not engage in formal economic modelling, but uses the incentive-based economic methodology. The article discusses the problematic incentives for litigating parties under the current rule of cause of action estoppel, and some of its inadvisable effects on the conduct of litigation, on the cost of litigation, and on the chances of reaching a settlement.
Reform of the rules for civil litigation is currently in the forefront of Canadian provincial policy-makers’ discussions, however, since there is little related literature specific to Canada, the present article relies mostly on US scholarship and on the Woolf Report in the United Kingdom.
Part I, largely a repetition of an exposition from my previous article, presents an overview of the broad-scope common law model of RJ and the main arguments in favour of the rules of cause of action estoppel.
Part II introduces some of the behavioural effects of cause of action estoppel. The main argument is that the rules of cause of action estoppel—and especially the rule against splitting a cause of action—have not been formulated consistently with the behaviour modification model and with the desirable atmosphere of co-operation proposed by the new procedural reforms. Consequently, in many cases the effect of the cause of action estoppel rules on the conduct of litigation is undesirable and injurious. For example, the cause of action estoppel stimulates overlitigation of the initial action. Among its other aggravating effects are increased plaintiff incentives to assert meritless claims and remedies in court. The cause of action estoppel also discourages the plaintiff from using legitimate strategic considerations.
Part III addresses the economic efficiency of the rules of cause of action estoppel in general. The main argument is that the rule against splitting a cause of action does not always contribute to an economically efficient legal system. The observations in Subsection B lead to the conclusion that under broad-scope cause of action estoppel fewer claims are submitted to the court, but the cost of every claim is much higher than that of an average claim under a narrow claim preclusion policy, which can have an adverse effect on access to judicial decision-making. Ex ante considerations of broad-scope cause of action estoppel can prevent plaintiffs from submitting their claims to the court because of the need to claim all remedies in one cause of action, which could increase trial costs to a level that may prevent litigants from submitting their claims at all. Furthermore, cause of action estoppel is liable to cause parties to include possible claims that they may be unwilling to forgo but are hesitant to press, which can also result in increased costs of litigation, both private and public. It seems that the aggravating effects of cause of action estoppel significantly increase both private and public litigation costs.
Part IV analyzes the effects of the rule against splitting a cause of action on the chances of reaching a settlement. The main argument is that in many ways this rule decreases the chances of reaching a settlement, which has an injurious effect on both the economic and behavioural aspects of litigation. By contrast, in many cases, allowing cause of action splitting is liable to significantly increase the litigants’ incentives to settle.
Part V outlines the basic elements needed for redesigning the rules of cause of action estoppel, arguing that the scope of cause of action estoppel should be narrowed. The article concludes by proposing to abolish the strict and broad rule against splitting a cause of action that is being applied in contemporary common law, and instead argues in favour of a more lenient and flexible rule.
I. Cause of Action Estoppel: Foundations and Justifications
A. Overview of the Rules of Res Judicata
The term res judicata refers to the various ways in which one judgment exercises a binding effect on another. The rules of RJ have undergone a significant change in scope. In the old common law, its scope was quite narrow. A judgment entered in a case on one form of action did not prevent litigants from pursuing another form of action, although only one recovery was permitted for a single loss. Following changes to the rules of litigation, as part of the evolution of modern procedure, the rules of RJ are now being applied in a wider scope. As the relevant literature asserts:
A party should not be allowed to relitigate a matter that it already hadopportunity to litigate. As the rules of procedure have expanded the scopeof the initial opportunity to litigate, they have invited a correspondingexpansion of the extent to which that opportunity forecloses a subsequentopportunity. As we shall see, this is the clear tendency in the modern lawof res judicata.
As applied in common law systems, the doctrine of RJ has two main forms: in England and Canada they are called “issue estoppel” and “cause of action estoppel”; in US terminology they are referred to as “issue preclusion” (traditionally known as “collateral estoppel”) and “claim preclusion”. As I quoted in my previous article, the House of Lords explained these two forms, as they are applied in English common law, as follows:
Cause of action estoppel arises where the cause of action in the laterproceedings is identical to that in the earlier proceedings, the latterhaving been between the same parties or their privies and having involvedthe same subject matter. ... [T]he bar is absolute in relation to all pointsdecided unless fraud or collusion is alleged.
Issue estoppel may arise where a particular issue forming a necessaryingredient in a cause of action has been litigated and decided and insubsequent proceedings between the same parties involving a different causeof action to which the same issue is relevant one of the parties seeks tore-open that issue.
English law contains an important requirement that both cause of action andissue estoppels apply not only to points that have actually been decided butalso to points “which properly belonged to the subject of litigation, and whichthe parties, exercising reasonable diligence, might have brought forward at thetime.” As emphasized by Zuckerman, “Thebar to advancing an identical cause of action is absolute.”
The Canadian legal system accepts similar definitions and distinctions between issue and cause of action estoppel. Key concepts governing cause of action estoppel in Canadian courts are similar to the English principles: the plaintiff must present the subject matter of the entire case relating to the cause of action at one time—once and for all—and any remedy following from the cause of action is based on that subject matter. The same principle applies to the defendant. As I wrote in my previous article, all subject matter germane to the claim or defence that could have been presented in the first action by exercising reasonable diligence, but was not, is estopped in a second action. In Canada, Lange explains that “[d]ecisions of cause of action estoppel defining the term ‘cause of action’ apply the generally accepted definition of ‘cause of action.’ A cause of action is the facts which give a person a right to judicial relief against another person.”
In my previous article I also discussed similar parallels in the US legal system. I wrote that in US terminology, “claim preclusion” refers to “the effects of the former judgment when the second action proceeds on all or part of the claim that was the subject of the first action.” The “bar” of a judgment annuls the entire cause of an action or claim, including items that were not raised in the former action. But what does the term “claim” mean for RJ purposes? There is a difference between the old view and the modern one. The present trend in the United States is to regard a “claim” in factual terms and make it coterminous with the transaction irrespective of whatever substantive theories or forms of relief flowing from those theories may be available to the plaintiff; irrespective of what or how many primary rights may have been infringed upon; and however different the evidence needed to support the theories or rights may be. The transaction is the basis of the litigative unit or entity, and it cannot be divided. In the words of Casad and Clermont, “The modern, so-called transactional, view of res judicata, dictates that the plaintiff should in a single lawsuit fully litigate all grievances arising from a transaction, just as the plaintiff may do under the modern rules of procedure.” According to Casad and Clermont, the rationale of this transactional perspective “is that this view increases efficiency, with an acceptable burden on fairness.”
I also wrote that the concept of claim preclusion is also referred to as “the rule against splitting a [single] cause of action.” The bar of a judgment for the defendant extinguishes the entire cause of action or claim, including items of the claim that were not raised in the former action. The plaintiff can no longer sue on the original cause of action or any item of it even if that item was omitted from the original action. A second effect of RJ, referred to in the United States as “issue preclusion”, “is that an issue determined in a [prior] first action may not be relitigated when the same issue arises in a later action based on a different claim or demand.”
The present article deals mainly with cause of action estoppel. As we have seen, in common law systems a plaintiff who obtains a judgment on a cause of action cannot initiate a second action on the same cause of action, although some exceptions to the general rule have been carved out in unusual circumstances. For example, in the United States, rules 59 and 60 of the Federal Rules of Civil Procedure describe various circumstances in which an American federal court may reopen a case in order to correct a mistake. There are also seven exceptions to the general rule mentioned in the Restatement.
The justification of the common law rules of RJ has been debated extensively by legal scholars. In Anglo-American legal systems, this justification is usually based on two theories: the general public interest in ending disputes that have already been litigated by establishing the finality of judicial decisions, and the individual’s right to protection from repetitive litigation.
Another public interest commonly used to justify RJ is the need to end litigation in order to ensure the economic efficiency of the courts and the speedy termination of lawsuits—and thus avoid squandering court resources and imposing unnecessary costs on litigants. Litigating the same matter more than once defeats this purpose. As shown in Part III, however, RJ does not always improve judicial efficiency and in many cases the doctrine causes additional costs that should be taken into consideration.
English jurist, Neil Andrews, sums up the traditional Anglo-American rationale and justification of RJ as a “principle of finality” that avoids dragging disputes, “greater legal expense”, “scarce ‘judge-time’”, “inconsistent decisions”, and “hardship on the victorious party” that might occur upon the reopening of a case. These policies raise issues of private justice between the parties, ensuring that the judgment would not be undermined by later proceedings, and protection of the parties from delay tactics. There have also been public policy arguments made on behalf of RJ.
II. The Behavioural Effects of the Rule Against Splitting a Single Cause of Action
A. The Behaviour Modification Model Perspective
In my last article I also wrote of Kenneth Scott’s two models of the civil process: the conflict resolution and the behaviour modification model. The conflict resolution model regards civil process primarily as a method of achieving a peaceful settlement of private disputes. In the interests of preserving the peace, society offers a mechanism for impartial resolution of personal grievances through the courts, as an alternative to forcible self-help. I wrote that, by contrast, the behaviour modification model regards the courts and the civil process as a way of altering behaviour by exacting a price for undesirable behaviour. The emphasis, in this case, is not on the resolution of the immediate dispute but on its effect on the future conduct of others. Scott argues that of the two models, “The Conflict Resolution Model is in the ascendant, and its implications seem to be carrying the day, at least in the federal courts.”
Scott urges a more careful consideration of the claims and implications ofthe behaviour modification model. Indeed, thebehaviour modification model stands as an alternative—or possibly asupplement—to the more prevalent account of litigation, which maintains that theobjective of litigation is to facilitate the civilized resolution of disputes.At this point it should be stressed that the present article does not ignore theconflict resolution model, and in our proposal of a new model in Part V below, Iargue that a “minimal concept of res judicata” should apply because it isdesirable from the perspective of the conflict resolution model. Furthermore,Part V presents an argument regarding the significance of issue estoppels, whichshould—in my opinion—apply anyway, even if we reconsider the need for abroad-scope rule of cause of action estoppel. It should be clear, therefore,that I do not argue against all the elements of RJ, but instead for its correctapplication. Nevertheless, as Scott suggests, we should also consider theimplications of the behaviour modification model in the context of the rules ofcause of action estoppel.
The present section sheds light on the behavioural effects of cause of action estoppel. The main argument is that the rules of cause of action estoppel, especially the rule against splitting a single cause of action, have not been shaped consistently with the behaviour modification model, and therefore in many cases their effect on the conduct of litigation is undesirable. Furthermore, in Parts III and IV, I suggest that these behavioural effects are also liable to increase the cost of litigation and reduce the chances of reaching a settlement.
B. Stimulating Overlitigation in the Initial Action
1. Aggravating Effects
The rule of cause of action estoppel is often interpreted as a prohibition against splitting a single claim or cause of action. According to the American authors, James, Hazard, and Leubsdorf, “[I]f the plaintiffs fail to include any part of a single demand or cause of action in the first action, they cannot, after judgment, bring another action to claim the omitted part, whether as an item of damage or a ground of recovery.” In particular, in the United States the rule stated in the Restatement § 24 exerts pressure on the plaintiff to present all material relevant to the claim in the first action, which is similar to the coercion of the defendant to produce all defences at once. The material to be presented roughly comprises “evidence” (connoting facts); “grounds” (facts grouped under a legal characterization); “theories of the case” (premises drawn from the substantive law); and “remedies or forms of relief” (measures or kinds of recovery). In most common law systems, a plaintiff who obtains a judgment on a claim cannot initiate a second action on the same claim, although as mentioned above, some exceptions to the general rule have been carved out in unusual circumstances.
Insisting on the inclusion of all distinct claims in one action has some disadvantages, as litigants are encouraged to argue each point with greater intensity for fear of the future effects of RJ. In other words, the rule of cause of action estoppel forces plaintiffs to include all the claims and remedies that may be developed from one cause of action, which significantly aggravates the dispute between the parties and forces them to litigate their potential claims to the utmost. By contrast, under a more flexible system—such as the model presented in Part V—that allows splitting a cause of action, plaintiffs are not forced to press their claims to the extreme.
The aggravating effects of cause of action estoppel contribute to unpleasant relations between the parties, which is an undesirable consequence by the standards of new procedural reforms that emphasize the importance of co-operation and of reasonable relations between the parties. As Zukerman explains, “The Civil Procedure Rules 1998 (CPR), which came into effect on April 26, 1999, have transformed English civil procedure. ... [These new rules have produced] a fundamental change in English litigation culture.” The CPR largely implement the recommendations made by Lord Woolf in his reports on access to justice intended to remedy the shortcomings of the old system. CPR 1.4(2) lists the objectives of good case management. The first objective states that the court must encourage “the parties to co-operate with each other in the conduct of the proceedings.” Zuckerman elaborates: “[The parties] must respond positively to reasonable requests for information and to invitations to settlement negotiations, and they are encouraged to agree [on] as many aspects of the litigation process as possible.” The duty to co-operate is considered to be one of the most significant cultural changes provided by the CPR. Lord Justice Brooke drew attention to this aspect: “The whole thrust of the CPR regime is to require the parties to behave reasonably towards each other in the conduct of the litigation.” The CPR stipulates that the duty to co-operate begins before the start of proceedings, as it demands compliance with pre-action trial protocols. Zuckerman explains that “[t]he aim of the pre-action protocols is to reverse the former culture of litigant warfare.”
It could be argued, therefore, that the rule against splitting a cause of action does not contribute to the desired change in culture mentioned above, but rather preserves the former culture of litigant warfare.
2. The Effect of the Rule on the Plaintiff’s Incentives to Sue
What are the effects of the rule against splitting a single cause of action on the plaintiff’s incentives to sue? I answered this question in my last article by writing that on the one hand, there is no doubt that without a broad-scope cause of action estoppel, the chances of parties litigating endlessly are greater. Therefore an argument can be made that, without cause of action estoppel, the plaintiff may have an incentive to sue the defendant again and again. This is not the only argument in favour of the cause of action estoppel rule, which presumes that plaintiffs are naturally inclined to be vexatious litigants. To the extent that the rationale is incentive based (as opposed to based on fairness or expectations), the intent is to create an incentive to address all issues arising from a single interaction between the parties in a single hearing, including all the necessary facts that can be found, and avoiding the risk of, say, inconsistent factual findings or verdicts.
On the other hand, the preceding discussion suggests another major effect of the rule against splitting a cause of action—namely, that the plaintiff may have a strong incentive to sue for all the potential claims and remedies that can be included in one cause of action. This is because plaintiffs know that if they fail to include any part of a demand or cause of action in the first lawsuit, then they cannot bring another action to claim the omitted part after judgment has been pronounced.
Where I differ in the present analysis is by pointing out that a similar effect, in many ways, can be found in criminal cases. Kate Stith analyzes some of the consequences of the asymmetry in the right to appeal in criminal cases. Under the asymmetric system of criminal appeals in the United States, acquittals are not appealable but convictions are. This system indiscriminately skews legal errors toward the prosecution’s side, and reduces the probability of conviction for both guilty and innocent defendants. Stith argues further that prosecutors are likely to respond strategically to the possibility of selection effects by raising issues that otherwise would not be pursued, thereby achieving a more symmetric distribution of disputes on appeal and reducing selection effects. She reasons that “[i]n particular, the possibility of pro-defendant selection effects resulting from a skewed distribution of disputes on appeal may lead prosecutors to counteract this skew by asserting meritless claims in the trial court.”
Returning to what I wrote in my previous article, in many ways, it is possible to consider the rule against splitting a single cause of action as an asymmetric rule that has a potential for pro-defendant selection effects resulting from the defendant’s protection against multiple actions. The pro-defendant effects may lead plaintiffs to counteract the skew by asserting meritless claims and remedies in court, because they know that they have only one chance of suing for the claims and remedies that may be developed from one cause of action. As illustrated in the following subsection, cause of action estoppel is liable to cause parties to include possible claims that they may be unwilling to forgo, but also hesitant to press.
Note, however, that there are other considerations that affect the plaintiff’s incentives to sue, such as expected litigation costs.
C. The Plaintiff’s Strategic Considerations
At any given point in the dispute, the plaintiff may be interested in only one claim or remedy, but because of cause of action estoppel, the plaintiff may be forced to sue for all potential claims and remedies in one action. If plaintiffs were permitted to initially sue for only a portion of the the remedies in a first action, without the risk of preclusion looming over the other remedies, they may later in a second action forgo the other remedies, or these may become irrelevant with time.
Usually the plaintiffs’ strategic considerations do not allow them to split a cause of action, although this may be permitted in rare and specific circumstances—as in the seven exceptions to the general rule mentioned in the Restatement § 26. The second exception refers to cases in which the court, in the first action, has expressly reserved the plaintiff’s right to maintain the second action. For example in cases of restitution relief, after a plaintiff fails in a breach of contract action:
Ordinarily the plaintiff avoids any question of being precluded from aremedy through merger or bar by seeking all plausible remedies at the outsetof the action, proving his full case, and securing the recovery to which heis entitled on the facts. If the plaintiff fears that he may suffer in astrategic sense from mingling his case for breach of contract with hisalternative case for restitution, he may apply to the court for the clearseparation of the issues for trial.
It appears, therefore, that the court can authorize cause of actionsplitting, but in practice, as Casad and Clermont emphasize, it does so only“when special circumstances justify a second action.” Moreover, the possible reservation of the action forrestitution relief after the plaintiff fails in their action for breach ofcontract, does not contradict the major arguments against splitting a cause ofaction because it is regarded as a specific exception, rationalized by thenature of contract law, rather than as alegitimization of the plaintiff’s strategic considerations in general. TheSupreme Court of Canada also held that discretion may be exercised in theapplication of both issue and cause of action estoppels. But in practice, the scope of discretion appears to belimited, and the concern for judicialfinality usually prevails when considering the exercise of discretion.
In what follows, I argue that in many cases in which the plaintiff has legitimate strategic considerations, the public interest and that of the litigants is best served by allowing the plaintiff to split the cause of action.
An Israeli Supreme Court ruling illustrates a typical case in which the strategic interest of the plaintiff is not to sue immediately for all the remedies in one action, but rather to retain the option to sue for some of the remedies in a later action. The case of Stefania Hotel Ltd v. Miller Estate involved the breach of a contract that obligated a company to purchase land and build a structure on it. The plaintiff wished to split the cause of action and only claim for enforcement or imposition in the first claim, and in a later action sue for other remedies such as compensation for the damages incurred because of the breach of contract. Justice Haim Herman Cohn stated that a plaintiff’s business objectives should be met if they have received an order to enforce their contract—as adequate compensation occurs through the incurred profits. But in the case of the respondent becoming victorious, a plaintiff often avoids the additional risk or cost of filing a second suit for compensation for the breach of contract. As such, he wrote that “if for some reason the court dismisses the enforcement-of-contract suit but at the same time finds that the contract does bind the respondents, then I cannot see a reason why the plaintiff would be unable to sue for compensation later on.”
In the case of Stefania Hotel, theIsraeli court legitimized the plaintiff’s strategic considerations. It makes sense in this case because theplaintiff’s main claim was enforcement, and although he had no clear intentionto sue for compensation, he wanted to save the option to do so in a lateraction—“just in case”. Both the public interest and the defendant’s interestwere thereby served because, in light of the permission given to the plaintiffto split the cause of action, the claim for enforcement could prove to besufficient. By contrast, if splitting the cause of action had not beenpermitted, the plaintiff may have been forced to sue for a remedy that he didnot really desire. In other words, we see again that cause of action estoppel isliable to cause parties to include possible remedies that they may be unwillingto forgo but are also hesitant to press.
To summarize, because the cause of action estoppel rule requires the plaintiff to engage in “kitchen sink” pleading, litigants must argue more points, each point with greater intensity. A more focused action, concentrating on the more meritorious causes of action, would minimize the stimulation that might otherwise occur. However, this state of affairs should be treated as a hypothesis, not as an empirical fact. 
Another important consideration mentioned in Stefania Hotel is that a permission to split a cause of action causes the first action to become an evaluation stage that provides litigants with an accurate judicial evaluation of their chances at later stages. The evaluation effect plays an important role in reaching a settlement.
A common strategic consideration occurs when the plaintiff cannot provide sufficient evidence to prove all issues and remedies. For most cases in the contemporary US legal system, “[a] mere shift in the evidence offered to support a ground held unproved in a prior action will not suffice to make a new claim avoiding the preclusive effect of the judgment.” I believe that this approach should be reconsidered. If plaintiffs were permitted to split a cause of action, in the first action they could claim only the remedies that could be easily proven; later, if they found sufficient evidence for a second remedy, they could sue for it separately. But under the rule against splitting a cause of action, plaintiffs are forced to delay their legitimate claim for the first remedy until they can provide sufficient evidence for all remedies. For example, in many tort cases it is known that a negligent defendant has caused damage, but it is often difficult to obtain a quick evaluation of the amount of damage caused because of difficulties in providing evidence, and so forth. The rule against splitting a cause of action can have undesirable consequences for the injured in these situations. In cases of this type, it would be appropriate to permit plaintiffs to split their cause of actions, allowing them to sue in the first action for an immediate restraining order or injunction, and later in a second action to demand compensation for damages.
In my last article I wrote that the plaintiff’s strategic considerations are also relevantwhen there has been a long relationship between the litigants, as for examplebetween a supplier and a large customer, or in other relationship contracts. Inthis type of situation, the damaged party is not likely to want to sue itsbusiness partner for all of the remedies that may flow from one cause of actionbecause it wants to continue the relationship. Instead, the party may want tofirst claim one remedy, and reserve the option to sue later for the otherremedies. Applying cause of action estoppel in such cases would force thelitigants into a broad legal battlefront that would probably damage their futurerelations, which is against the interests of the litigants and of the public.The public interest, and that of the litigants, is best served by allowing theplaintiff to split the cause of action in such cases—not only ex ante (when requested by the plaintiff inthe first action), but even ex post (when it was not requested during thefirst action).
Currently though, it must be admitted that not every strategic consideration is legitimate, and the court should not always allow the plaintiff to split a single cause of action. For instance, the court should not allow a plaintiff to split the cause of action if this harms the defendant, or if the judge believes that the plaintiff is attempting to harass the defendant by repeatedly submitting one claim against the defendant at a time in order to cause damage to the defendant. In such a case, the plaintiff has no legitimate reason for splitting a single cause of action because it does not contribute to the behaviour modification of litigation, which I believe should be a major consideration in allowing a cause of action to be split. Furthermore, although some courts cite mistake or ignorance on the part of the plaintiff in the first action as sufficient grounds for splitting a cause of action, we should accept Vestal’s conceptual view that “when the purposes served and the general framework of preclusion/res judicata are considered, it would seem to be logical to conclude that a plaintiff is under an obligation to present his entire claim in the first suit, and that mistake or ignorance will not excuse him from the requirements of this rule.”
The considerations cited above help explain the need for replacing the current common law model of a broad-scope cause of action estoppel with a more balanced and flexible one.
III. The Economic Efficiency Perspective
A major feature of civil procedure is ensuring that the legal system produces results with the least possible expenditure of time, money, and energy. Economic considerations legitimize outcomes on the grounds that decisions are rendered with the interests of both the individual and of society in mind. Many scholars are increasingly using economic models to analyze litigation outcomes. The possibility that a given trial outcome will have preclusive effects on future litigation significantly influences the outcome of negotiations and is relevant to the question of settlement extortion. This section deals with the economic efficiency perspective of the rules of cause of action estoppel in general, by using utility-based analyses of the law—the article does no formal economic modelling, but uses the incentive-based economic methodology. The argument here is that the rule against splitting a single cause of action does not always contribute to producing an economically efficient legal system.
A. Does Res Judicata Contribute to Producing an Economically Efficient Legal System?
I pointed out in my last article that, although many scholars consider RJ to contribute significantly to the economic efficiency of the courts, others, such as Edward Cleary, argue that this justification is insufficient. He believes that “[m]aintenance of the judicial system is a very minor portion of the cost of government. If the judges are too few to be able to decide cases fairly and on the merits, the public probably can afford to have more judges.”
Decisions about whether and how to economize are required at points oftension between individual and public needs. Cutting costs can mean sacrificingother valued needs, as in the case of RJ. Thedoctrine of RJ remains problematic even if we reject Cleary’s view.
My present argument is that it appears that an economically efficient legal system must apply a so-called “minimal concept of res judicata”, so that the rules of RJ are “limited to the narrow question whether the prior action actually decided the issues necessarily involved in awarding the judgment.” I agree with those who maintain that “[i]t seems clear that the adjudicative process would fail to serve its social and economic functions if it did not have this minimal effect.” Furthermore, there are significant efficiency factors that justify the need for a rule of preclusion, such as avoiding wasteful repetitive litigation and providing court access to litigants waiting in queue. But we have seen that the modern rules of procedure have expanded the scope of the rules of cause of action estoppel and the prohibition against splitting the cause of action. The question remains whether the modern broad-scope cause of action estoppel actually contributes to an economically efficient legal system. Some scholars argue in favour of broad-scope preclusion, stating that, “[i]f two trials would produce a large overlap of issues or evidence, it is wasteful to society and harassing to the adversary to have more than one trial.”
This statement puts forth an important argument for preclusion, but it doesnot take into account major efficiency factors favouring non-preclusion. A morebalanced view is expressed by Casad and Clermont:
“A fuller explanation of the policies that detail res judicata wouldrecognize that efficiency factors can counsel not only for but also againstpreclusion.” This statement seems moreaccurate. Casad and Clermont continue on to argue that “[s]ome major fairnessfactors push against a rule of preclusion, but so do some minor efficiencyfactors.” I will show that there are manyfundamental efficiency factors, in addition to the “minor” ones mentioned byCasad and Clermont, which argue against arule of preclusion, and that the modern common law broad-scope model of cause ofaction estoppel is in many ways inefficient. In some cases, RJ, and especiallythe rule against splitting a single cause of action, does not contribute to aneconomically efficient legal system.
B. Litigation Costs
As the economists say, litigation is costly. It involves both private and public costs (the latter, in the form of expenditures for judges, court personnel, and courthouses). Private litigation costs involve, at a minimum, the collection and exchange of information between the parties about the nature of the claimant’s legal demand and the basis of the respondent’s refusal to comply with the demand. When the controversy reaches the stage of litigation, the parties incur additional costs in their efforts to convey information to the court by pleading, motions, testimony, and so forth. There are usually additional costs such as lawyers’ fees, court fees, stenographic costs, expert witness fees, and other expenses.
Below, I analyze the litigation costs caused by cause of action estoppel. In advancing the economic case against the cause of action estoppel rule, I compare the presumed cost of litigation under the rules of cause of action estoppel with that of a more focused litigation (the latter being possible only if we have pared down the cause of action estoppel rule), and show that the latter may be cheaper than the former.
1. Ex Ante Analysis
The aforementioned traditional view that “it is wasteful to society and harassing to the adversary to have more than one trial,” and similar justifications of cause of action estoppel, address the rule from an ex post perspective, without considering the effects of the rule on the parties’ incentives before a dispute has been initiated. Some scholars argue that procedural rules are often examined from a narrow perspective, focusing on the effect of the rules expost. In an effort to strike a proper balance between “justice” and “efficiency”, courts tend to ignore the ex ante effects of procedural rules, that is, the effects before their actual application. Ex ante examination of legal rules is a fundamental element of the economic approach to the analysis of law, designed to give jurists an insight into the effects of legal rules on the behaviour of the parties.Ex ante analysis of the rules of cause of action estoppel can reveal the effect of these rules on private litigation costs.
It appears that the broader the scope of cause of action estoppel, the higher the private litigation costs of conducting a single lawsuit. First, under broad-scope cause of action estoppel, it is necessary to fully claim all items and remedies that are part of one cause of action in a single action because the plaintiff cannot sue later on the original cause of action or on any of its items—even if the item has been omitted from the original action. Second, it is necessary to expend significant effort on each cause of action because the consequences of the decision have far-reaching effects on possible future actions. So, the broad-scope cause of action estoppel substantially increases the litigation costs of both the plaintiff and the defendant. Naturally, broad-scope cause of action estoppel also increases public litigation costs because the court must spend more time dealing with the initial action.
Furthermore, it appears that the broad-scope of the cause of action estoppel produces uncertainty over the rights of the parties because the many issues, claims, and remedies that are involved significantly increase ambiguity. This also increases the ex ante costs of litigation owing to higher “uncertainty costs”.
These observations lead to the conclusion that under broad-scope cause of action estoppel, fewer claims are submitted to the court, but the cost of every claim is much higher than that of an average claim under a narrow cause of action estoppel policy. This can have an adverse effect on access to judicial decision-making.Ex ante considerations of broad-scoped cause of action estoppel can prevent plaintiffs from submitting their claims to the court because of the need to claim all remedies in one cause of action, which could increase trial costs to a level that may prevent them from submitting their claims at all.
2. The Direct Costs of Stimulating Overlitigation in the Initial Action
We have seen in Part III that insistence on including all factually distinct claims in one action may have disadvantages, some of which affect cost-efficiency for both the litigants and the courts. As noted, preclusion is liable to force parties to litigate their potential claims to the utmost, thereby increasing the cost of litigation. But if the plaintiff were permitted to sue in the first action for only a portion of the remedies without the risk of preclusion, there is a reasonable chance that in many cases, as shown above, there would be no need to sue for the other remedies in the end. In the cases illustrated in Part II.C—dealing with the plaintiff’s strategic considerations—it is in the public’s interest to allow the plaintiff to split a single cause of action in order to maximize the efficient operation of the courts, and reduce both private and public litigation costs.
As mentioned, cause of action estoppel is also liable to cause parties to include possible claims that they may be unwilling to forgo but are simultaneously hesitant to press, which can also result in increased costs of litigation, both private and public. As I quoted before in my last article, Casad and Clermont explain this issue as follows:
The simplistic approach is to assume that res judicata, at least ifeffortlessly applied, always saves costs by foreclosing additionallitigation. But a moment’s thought reveals countervailing effects. A broadrule of claim preclusion will encourage a claimant to put everything beforethe first court, while a narrower rule might result in unasserted mattersnever having to be litigated at all. A broad rule of issue preclusion, whichestablishes an outcome for all purposes in all contexts for all times, mayproduce litigation to the death over that issue in the initial action.Obviously, every res judicata problem requires the weighing of net savings:adding up the savings of avoided later litigation, but subtracting the costsof fighting over res judicata’s application and also the costs ofintensified initial litigation.
In some cases, the plaintiff is not permitted to split a single cause ofaction into two or more actions that deal with the different remedies thatfunction in different directions, such as when the plaintiff claims forcancellation and restitution, and alternatively claims for the enforcement ofthe contract. In such cases, the cause of action estoppel forces the plaintiffto provide sufficient evidence to prove both remedies. This makes the litigationmore complex and less efficient for both the court and the litigants than if theplaintiff were permitted to split the cause of action into these two remedies,with a reasonable chance that the first remedy would be sufficient and thesecond remedy unneeded. But even if the plaintiff wished to sue later, thepermission to split remedies would not be considered inefficient; since thecourt’s decision in the first action should function as an issue estoppel, theissue determined in a prior action could not be relitigated in the later actionbased on a different claim or demand.
3. Aggravation Costs
An additional aspect of the cost of litigation, described in the following, is the psychological toll that it carries:
Litigants usually find litigation to be not merely a distracting “wasteof time” but also intensely aggravating. They suffer worry, loss of sleep,tension, and spasms of rage. There is no legitimate market value for thiskind of human suffering, and calculation of its cost is thereforeartificial. ... The cost for most people is nevertheless real, perhapsespecially “real” precisely because the burden of this cost is not readilytransferable through the market or through a measure of damages. ... Be thatas it may, it is possible to assign artificially a value to psychologicalcost, just as the law assigns a value to “pain and suffering” incurred byone who has suffered personal injury. That value can then be madecommensurate with other costs involved.
It seems that the aggravating effects of cause of action estoppel describedin Part II increase the psychological aspects of the private costs oflitigation. Furthermore, as we have seen, the aggravating effects harmco-operation and the reasonable relations between the parties, which in turnfurther increases both private and public litigation costs. At the same time, wemust also take into account the possible psychological costs of repeatedinteraction during litigation—but these costs are not certain as they arepresent only when the plaintiff chooses to litigate multiple cases, whereasunder the current rule against splitting a single cause of action, the presenceof psychological costs is beyond any doubt.
C. Long-Run Efficiency Considerations
Casad and Clermont highlight the efficiency considerations of the long-run deterrent effects of RJ:
Society, including all litigants, has an interest in avoiding theexpenditure of time, energy, and money on repetitive litigation and inproviding court access to the others waiting in line. That seems obviousenough, but it entails some nonobvious corollaries. Most importantly, thelawmaker must not restrict attention to short-run considerations. Asignificant efficiency consideration is the long-run deterrent effects ofres judicata.
Casad and Clermont argue that the long-run aspect favours a broad-scope ruleof cause of action estoppel: “Claim preclusion’s harsh result in the case athand might encourage many future litigants to dispose of their whole dispute,optimally defined, in a single lawsuit.”
This is true, but it is only one part of the picture. We must also pay attention to another long-run consideration favouring non-preclusion. The discussion of the aggravating effects of the rule against splitting a cause of action in Part II.B, revealed that the pro-defendant effects of the rule may cause plaintiffs to counteract the skew by asserting meritless claims and remedies in court. Thus, in the long-run, cause of action estoppel increases the cost of public litigation by providing plaintiffs with added incentives to sue for meritless claims.
IV. The Effects of the Rule Against Splitting a Single Cause of Action on the Chances ofReaching a Settlement
A. The Importance of Promoting Settlements
In recent decades, the promotion of settlements has become an increasingly important part of the judicial role and the procedural system. But however much we value compromise, there is always a need for a legal process in which rights, entitlements, and claims can be tested and determined by the court. Methods such as pretrial conferences and court-ordered mediation, as well as a growing movement for alternative dispute resolution (ADR), serve to find new ways of encouraging parties to resolve their disputes without going to trial. The principal rationale for this effort is the belief that ADR will reduce the large backlog of cases facing trial and appellate courts. Out-of-court settlements have many benefits and offer considerable savings to litigants and the court. Parties that settle are spared the cost of litigation and obtain swift resolution. At the same time, scarce court resources are spared. By settling their dispute, parties also avoid the tension, uncertainty, and emotional burden that litigation often entails.
Promoting settlement is also a major objective of the new English CPR. In his report on access to justice, Lord Woolf said that court resolution should be seen as the last resort, to be employed only if the parties are unable to resolve their dispute otherwise. CPR 1.4(2)(e) and (f) express this idea by requiring the court to encourage the parties to settle their disputes using alternative resolution procedures. To achieve this, the CPR adopted a two-pronged strategy: facilitating inter-party communication and providing economic incentives for settlement.
The present subsection analyzes the effects of the rule against splitting a single cause of action on the chances of reaching a settlement. I argue that in many ways—although not always—the rule reduces the chances of achieving a settlement and therefore has a harmful effect on both the economic and behavioural aspects of litigation, in addition to the effects discussed in the previous sections. By contrast, allowing the splitting of a single cause of action is liable—in many cases—to significantly increase the litigants’ incentives to settle and could play an important role in promoting settlements.
B. Splitting of a Single Cause of Action as an Opportunity for Employing SettlementStrategies
The present subsection shows how allowing splitting of a single cause of action can play an important role in promoting settlements by providing opportunities for the parties to employ useful settlement strategies.
1. How Does the Aggravation of Dispute Affect the Chances of Reaching a Settlement?
The aggravating effects of cause of action estoppel, as we have seen, contradict the desirable objective of co-operation between the parties in the conduct of proceedings. According to the modern English CPR, the duty of the parties to co-operate also means that “[t]hey must respond positively to reasonable requests for information and to offers to invitations to settlement negotiations, and they are encouraged to agree [on] as many aspects of the litigation process as possible.” Under the broad-scope rule of cause of action estoppel, it is difficult to create the environment of co-operation needed to achieve a settlement.
The rule of cause of action estoppel forces plaintiffs to include all the claims and remedies that may be developed from one cause of action, thereby aggravating the dispute between the parties, and forcing them to litigate their potential claims to the utmost. It is clear that aggravation of the dispute resulting from the rule against splitting a cause of action reduces the chances of reaching a settlement.
2. Mediator Settlement Strategies
The theory of mediation illustrates how the process of determining which issues are included in a legal action, and in what order, greatly affects the outcome. The approach recommended by many mediators is to discuss the less problematic issues in the beginning and leave the more emotional and intensely disputed issues for later, or perhaps not address them at all. This settlement strategy helps establish a more congenial atmosphere in which the parties are more co-operative and have a greater chance of reaching a settlement. Therefore, the mediator steers the discussion toward the issues that are most likely to be relevant to finding a solution or a settlement.
It is clear that the rule against splitting a cause of action is a major obstacle to the use of mediator settlement strategies. By contrast, allowing the splitting of a single cause of action can establish a more congenial atmosphere that provides the parties with better opportunities for achieving a settlement. At the same time, it can be argued that without prohibiting the splitting of a single cause of action, the litigants could go on litigating endlessly rather than settle. But this argument is not convincing because, as mentioned in Part III.C, the judge has the authority to prevent the plaintiff from splitting a cause of action when it does not conform to the behaviour modification model of litigation.
3. The Initial Action as an “Early Neutral Evaluation”
Another important consideration favouring cause of action splitting is illustrated above in the Stefania Hotel case in Part II.C. With the permission to split a single cause of action, the first action becomes an early neutral evaluating stage that provides the litigants an accurate judicial evaluation of their chances at the later stages, which affects the chances of reaching a settlement.
Many scholars have emphasized the significance of early evaluation as an important factor in encouraging a settlement. In his report on access to justice, Lord Woolf explained that we need a system “which enables the parties to a dispute to embark on meaningful negotiations as soon as the possibility of litigation is identified, and ensures that as early as possible they have the relevant information to define their claims and to make realistic offers to settle.” A number of settlement processes, such as mediation and some forms of neutral case evaluation and scheduling, may be able to provide the litigants with more and better information for problem-solving. For example, parties to legal disputes have resorted to “mini-trials” to resolve complex litigations between wealthy parties such as corporations. At the mini-trials, the parties present summaries of their cases. They do so within narrow time limits, before a neutral expert, and in private proceedings in the presence of senior officers from each party. Having been educated about the strengths and weaknesses of each side, the officers try to work out a settlement. They may ask the expert to advise them on the case. In the United States there is great awareness of the advantages of early neutral evaluations, mini-trials, summary jury trials, and so forth. In England as well, we find that “[i]n the Commercial Court, the parties’ attention is drawn to the possibility of an ‘early neutral evaluation’ of the dispute.”
In sum, it seems that allowing the splitting of a single cause of action can play an important role in promoting settlements by providing opportunities for the parties to use the first action as an “early neutral evaluation” device for obtaining an accurate judicial evaluation of their chances in the later stages, and therefore significantly increasing the chances of achieving a settlement. At the same time, note that the “evaluation stage”, such as in the form of judicial dispute resolution, summary trials on a single issue, and the mini-trial process, is now commonplace in contemporary litigation. In other words, we need not jettison the cause of action estoppel in order to enjoy the benefits of early evaluation, but the benefits of early evaluation could be enhanced by allowing the splitting of a single cause of action.
C. The Effects of Certainty and Uncertainty on the Chances of Reaching a Settlement
Another argument against broad-scope cause of action estoppel is based on its potentially negative effect on the ex ante chances of the parties to settle without going to trial, which depends on their expectations about what may be achieved in a compromise versus a court action. It has been noted that “the parties, having found out in the course of discovery the strengths and weaknesses of their cases, will be more inclined to settle without going to trial at all.” As Michael E. Solimine reveals:
A well-developed literature suggests that the litigants’ certainty as tothe facts and law of the case leads to settlements. As the parties’assessments of the facts and of the law become more accurate and converge,the more likely it is that the parties can confidently predict the outcomeof a trial, and settle accordingly.
Applying this consideration to the rule against splitting a cause of actionsuggests that a broad-scope of this rule obstructs the clarification of thestrengths and weaknesses of the parties because the many issues, claims, andremedies involved increase the uncertainty about the parties’ chances at trialand diminish the chances of out-of-court settlement. This argument, however, is not as strong as the othersmentioned in the previous subsections because there may be other factors thatsupport a broad-scope cause of action estoppel policy. Solimine suggests that“[p]aradoxically, equally impressive sources argue that risk-averse parties aremore likely to settle if the results of a trial are uncertain.” If this last assumption is true, then the rule againstsplitting a cause of action can actually contribute to achieving a settlementbecause the rule increases uncertainty about the parties’ chances at the trial.And to his question of who is right, Solimine provides a reasonable answer:“Perhaps both, in that ‘certainty’ is not a singular concept.” He concludes that “[i]tseems likely, however,that certainty as to the procedural or substantive law will lead to moresettlements than not.”
Another relevant factor regarding the effects of uncertainty on the chances of achieving a settlement is the manner in which the defendant evaluates the future possibility of being sued again by the plaintiff based on the original cause of action. A series of Psychological Science studies shows that people value future events more than past events. One could argue, therefore, that under a legal system that allows the splitting of a single cause of action, the defendant would hesitate to settle on the first action because he is aware of the possibility of being sued again in the future by the same plaintiff on one of the remaining items of the original cause of action that were omitted from the original action. Nevertheless, the possibility of a future suit does not necessarily cause the defendant to reject settlement offers presented in the first action because of the “optimism bias” applied by Oren Bar-Gill. Based on insights from behavioural law and economics, among them the underestimation of future borrowing caused by the optimism bias, Bar-Gill explains how consumers use credit cards. He argues that “[c]onsumers tend to underestimate the likelihood of adverse events that might necessitate borrowing. Optimistic individuals tend to underestimate the probability of being involved in an accident that might generate high bills or other liquidity needs.” He concludes that “[t]hese and other manifestations of the optimism bias lead consumers to underestimate the likelihood that they will incur a liquidity shock that necessitates a resort to credit card borrowing.” Applying Bar-Gill’s observation in the context of our discussion about the effects of uncertainty on the chances of achieving a settlement might produce a reasonable explanation why the possibility of a future suit does not necessarily incline a defendant to reject settlement offers presented in the first action. Because optimistic defendants tend to underestimate the likelihood of a future suit by the plaintiff, they would not reject a reasonable settlement offer presented during or before the first action. At the same time, one can argue that optimism about the chances of future filing can act against accepting a settlement offer in the present. Optimism about one’s own chances in future litigation would surely act against accepting a settlement offer at that moment.
It is not easy, therefore, to reach a final and clear conclusion about the effects of uncertainty (in the context of applying or not applying the rule against splitting a single cause of action) on the chances of achieving an out-of-court settlement.
V. Redesigning Cause of Action Estoppel
A. Toward a Narrow-Scope Rule
The analysis of conceptual contentions against the broad-scope Anglo-American rule of cause of action estoppel presented above revealed the problematic incentives for litigating parties under the current rules of cause of action estoppel: the undesirable effects on the conduct of litigation, the cost of litigation, and the chances of reaching a settlement. We have seen that the rule against splitting a cause of action is inconsistent with some of the major aspects of the behaviour modification model, and I argued that the rule does not necessarily contribute to an economically efficient legal system. I presented many procedural factors that argue against cause of action estoppel in its broad-scope common law version, although it should be emphasized that along with these factors we also find a few factors favouring the current rules of cause of action estoppel.
It appears that an economically efficient legal system must apply a so-called “minimal concept of res judicata”, meaning that the rules of RJ should be limited to the narrow question of whether the prior action actually decided the issues that were necessarily involved in awarding the judgment. This “minimal concept of res judicata” is also desirable from the perspective of the conflict resolution model. I agree with those who argue that “[i]t seems clear that the adjudicative process would fail to serve its social and economic functions if it did not have this minimal effect.” Furthermore, there are significant efficiency factors that justify the need for a rule of preclusion, such as avoiding wasteful repetitive litigation and providing court access to litigants waiting in queue. But the article has presented many more procedural factors that argue against cause of action estoppel in its broad-scope common law version than those that argue for it. Also note that the actual effect of the few factors favouring the current rules of cause of action estoppel is rather small because the effects of issue estoppels or preclusion already ensure that an issue determined in a prior action cannot be relitigated if it arises in a later action based on a different claim or demand. In sum, the present article recommends reconsidering the rules of cause of action estoppel and redesigning them according to a more balanced paradigm.
In principle, according to arguments forwarded in this article, there is no reason why the rules of cause of action estoppel cannot be limited to the narrow question of whether the prior action decided the issues involved in awarding the judgment. According to this approach, cause of action estoppel is a drastic measure and should be applied only in clear cases in which a matter has been directly litigated, when one “has had his day in court”, and it should not to be extended to matters that could or should have been raised and litigated in the first action.
Conceptually, as I have shown elsewhere, the effects of RJ are inconsistent with some of the main characteristics of the Anglo-American system itself and contradict many of the valued features of the procedure, such as the authority of the litigants and opportunities for persuasion, correctness, revisionism, economy, and consistency. Clearly the litigants’ autonomy is especially disregarded with the application of cause of action estoppel, which forces the plaintiff to submit the subject matter of the entire case relating to the cause of action at one time, including every remedy flowing from the cause of action based on the subject matter. James, Hazard, and Leubsdorf note the conflict between the two fundamental goals of civil procedure are “to permit full development of the contentions and evidentiary possibilities” of plaintiffs and respondents, and “to bring an adjudication to a final conclusion with reasonable promptness and cost,” with the second aim receiving lesser weight.
The rules permit the presentation of alternative positions and considerablefreedom in developing both the claim and the defence during the trial. Similarliberality should be allowed after the judgment.
B. A Comparative Perspective
Martin Shapiro has claimed that it should be a chief purpose of comparative law to provide data for testing general theories about law. Indeed, examination of legal history reveals that the rules of claim preclusion did not always apply in some legal systems. Furthermore, our proposal in favour of narrow-scope claim preclusion is strengthened by the experience of two legal systems, German-Continental civil law and Jewish law, which have adopted a minimal concept of cause of action estoppel. In the past, I presented a general recommendation for reconsidering the rules of RJ through a comparative analysis. Some of the observations presented in that article apply here as well with regard to cause of action estoppel and the rule against splitting a cause of action.
The German model of RJ is in many regards similar to the doctrine of RJ in Anglo-American jurisprudence, but the scope and effect of the doctrine are somewhat different. According to one interpretation of the German doctrine, the goal of RJ is to guarantee certainty in litigation and to preclude repeated relitigation of matters already litigated and decided. German civil procedure does not recognize the concept of RJ in its broad, common law sense. The basic rule is that a judgment binds the parties with respect to the subject matter of claims actually asserted and decided, but parties are not bound in actual or potential claims not submitted for adjudication. In other words, the concept of cause of action estoppel in the broader Anglo-American version, including the rule against splitting a cause of action, does not apply in the German civil procedure. In the previous subsection, I argued for the desirability of a narrow-scope rule of cause of action estoppel. In this sense, the German model of RJ is superior to the common law model.
In my earlier article, I presented the details of the concept of non-finality of judgments, unique to Jewish law. Although RJ applies to some extent in Jewish law as well, it is minimal compared with common law and continental jurisprudence. Jewish law also adopts a balanced approach toward cause of action estoppel from the perspective of the behaviour modification model and from the point of view of cost efficiency. In principle, the plaintiff has the right to divide a cause of action into different stages and submit different claims because the plaintiff may have legitimate reasons for doing so. Nevertheless, the court does not permit the plaintiff to split a single cause of action if it will harm the defendant, or if the judge believes that the plaintiff is attempting to harass the defendant by submitting one claim at a time in order to make the defendant take a new oath each time.
The above observations are based on the writings of an important rabbinical authority, Rabbi Shimeon ben Tzemach Duran, the Rashbatz, a North African rabbi of the fourteenth century who was asked about a defendant’s demand that the plaintiff aggregate all of his remedies in one cause of action so that he may not reopen the case later. In other words, the defendant was seeking to achieve the effect of an ancient version of the rule against splitting a single cause of action and the rule of cause of action estoppel to prevent the plaintiff from later reopening the case. Rashbatz wrote that there is no legal ground for compelling the plaintiff to assemble all of his remedies against the defendant in one cause of action. According to Rashbatz, the plaintiff has the right to sue in a first action based on one remedy only, and later again in other actions based on other remedies. The plaintiff has the right to divide one cause of action into different stages and sue separately based on different remedies because the plaintiff may have legitimate reasons for doing so. Rashbatz presented some of these reasons. First, the plaintiff may have witnesses who can appear readily in court to testify about one remedy, whereas witnesses related to another remedy may be far and cannot appear in court immediately. In this situation it would be unjust to prevent the plaintiff from submitting an action until it is possible to include all the claims. Second, the plaintiff may not want to submit all of the remedies in the beginning because there is a chance that the defendant would later acknowledge the second remedy. Third, the plaintiff may believe that there is a chance of reaching a settlement or compromise with the defendant regarding the second remedy. Fourth, in the beginning the plaintiff may not know all the potential remedies that are possible against the defendant. All of these reasons are considered sufficient for splitting a cause of action into different stages, so that cause of action estoppel does not apply to it. The defendant can prevent the plaintiff from splitting the cause of action only if it can be shown by the defendant that this would cause damage to the defendant’s property. The main halakhic codifiers accepted Rashbatz’s opinion.
As I wrote in my prior article, the defendant’s objection to the plaintiff splitting the cause of action is accepted by the court if such splitting is liable to cause damages to the defendant. For instance, if a claim of non-ownership of land is filed against a defendant who has possession of the land under dispute, and the plaintiff asks the court to address the issue of the land’s ownership at a later stage, the defendant’s objection is accepted because delaying the judicial decision about ownership could affect the value of the land, which would decrease owing to rumours about the ownership dispute. The court can also prohibit the plaintiff from delaying part of the claim even if smaller damages may be incurred by the defendant—for example, if multiple actions against the defendant would affect the defendant’s reputation.
Another sixteenth century North African rabbi I wrote of, Radbaz, commented in a responsum that the court should not permit the plaintiff to split a single cause of action if the judge believes that the plaintiff is a fraud who wants to harass the defendant repeatedly with one claim at a time in order to make the defendant take a new oath each time. In such a case the plaintiff has no legitimate reason for splitting a cause of action, contrary to the cases mentioned by Rashbatz.
Conclusion: A Proposal for a New Model
The present article argues that some of the major elements of RJ, especially cause of action estoppel and the rule against splitting a single cause of action, raise difficulties and have many drawbacks—moral, conceptual, social, behavioural, in addition to cost efficiency drawbacks. It was demonstrated that the rules of cause of action estoppel, and particularly the rule against splitting a single cause of action, do not necessarily contribute to an economically efficient legal system, and that these rules act as obstacles to achieving a desirable behaviour modification model of litigation and to reaching a settlement. They also provide problematic incentives to the parties involved. The rules of cause of action estoppel, especially the rule against splitting a single cause of action, do not comply with the behaviour modification model because they have an undesirable effect on the conduct of litigation. It was further shown that the said behavioural effects might also increase the cost of litigation and reduce the chances of reaching a settlement.
Note that the difficulties raised by the present article with regard to the rules of cause of action estoppel do not necessarily amount to a complete indictment of the concept of RJ, and some good arguments support at least a minimal concept of RJ. But the arguments presented here should lead us to reconsider the current broad-scope common law model of RJ and help us understand the need for a more balanced model. The traditional assumption that an efficient judicial system should seek to include everything in one single “cause of action” is not accurate, at least in the cases addressed in this article. I therefore propose to establish a more balanced rule that would replace the current broad-scope rules of cause of action estoppel and the rule against splitting a cause of action.
According to the proposed model, the optimal concept of cause of action estoppel should be narrower than the Anglo-American version. The basic rule should be that a judgment binds the parties with respect to the subject matter of claims actually asserted and decided, but parties are not bound in actual or potential claims not submitted for adjudication.
A legal system aiming to serve litigants must combine the practical-strategic considerations of both litigating parties and those related to the efficiency of the judicial system. The proposed model should seek to include in a single lawsuit only that which is efficient to include in that lawsuit from the perspective of both the courts and the litigants. It is not necessary to fully litigate all grievances arising from a transaction. Three major procedural goals should be considered by the courts: (a) contribution to the efficiency of the legal system, (b) contribution to the behaviour modification model and to the co-operation of litigants, and (c) increasing the chances of reaching a settlement. I propose cancelling the contemporary common law strict and broad-scope rule against splitting a cause of action because this rule does not achieve the three desired procedural goals. Instead, I propose that a more lenient and flexible rule apply, which gives the court greater discretion to act in a way that is consistent with the three major procedural goals. In my proposal, the default rule permits cause of action splitting, but there are exceptions to the general rule. The court should have the authority to prevent the plaintiff from splitting a cause of action when it finds that cause of action splitting would clearly cause inefficiency, have a harmful effect on the behaviour modification model, or reduce the chances of reaching a settlement.
It is possible to say that I chose the easy way of arguing against a strict rule and in favour of a flexible one, which is always more straightforward because it allows for discretion. But what about the costs of discretion, such as increased uncertainty, subjectivity of judges, lack of clear ex ante prescriptions, and so forth. The answer is that the current common law rule is not as strict as it seems and also suffers from similar costs of discretion and uncertainty. As I have stated elsewhere, although the public interest in RJ is justified by the general trend to promote stability, certainty, and consistency, modern Anglo-American rules often do not promote these values in practice. The major trend in the development of the modern doctrine of RJ expands the theoretical applicability of the preclusion rules, at the same time recognizing and generating more and more exceptions of considerable scope and discretionary nature to this doctrine. It is clear that this trend does not contribute to certainty and consistency. Another factor causing uncertainty and inconsistency is the variety of definitions offered by judges, scholars, and statute-writers to the phrase “cause of action”—the broader the definition, the broader the scope of preclusion. Despite attempts to find an acceptable definition of “cause of action”, no consensus has been reached. It appears, therefore, that our proposal in favour of a flexible rule would not significantly increase the costs of discretion that are also present in the current rule.
Under the proposed flexible rule that allows splitting a cause of action or claim, plaintiffs can pursue a cause of action in stages, using legitimate strategic considerations, and are not forced to press their claims to the utmost. The court should allow the plaintiff to split a single cause of action ex ante (when requested by the plaintiff at the beginning of the proceedings) or even ex post (when it had not been requested initially). This does not mean, however, that every strategic consideration is legitimate. The court should not allow cause of action splitting in every case. For instance, as mentioned previously, it should not allow the plaintiff to split a single cause of action if it would harm the defendant or if the judge believes that the plaintiff is attempting to harass the defendant repeatedly with one claim at a time in order to cause damage to the defendant. In such a case the plaintiff has no legitimate reason for splitting a single cause of action, as it does not contribute to the behaviour modification model of litigation, which I believe should be a major consideration in allowing a cause of action to be split. Nevertheless, we cannot ignore the considerations of the conflict resolution model and, at the beginning of this section, I also argued that a “minimal concept of res judicata” should apply since it is also desirable from the perspective of the conflict resolution model.
I am indebted to Alex Stein, Michael Karayanni, Ehud Guttel, Adi Ayal, Yuval Feldman, and Doron Teichman for their important suggestions and useful comments. I also want to thank the McGill LJ editorial staff and reviewers for their excellent work.
Fleming James Jr, Geoffrey C Hazard Jr & John Leubsdorf, Civil Procedure, 5th ed (New York: FoundationPress, 2001) at 673.
See e.g. George Spencer Bower, The Doctrine ofResJudicata, 2d ed by The Right HonourableSir Alexander Kingcome Turner (London, UK: Butterworths, 1969); Neil Andrews,Principles of Civil Procedure(London, UK: Sweet & Maxwell, 1994) at 501-13 [Andrews, Principles]; Adrian Zuckerman, Zuckerman on CivilProcedure: Principles of Practice, 2ded (London, UK: Sweet & Maxwell, 2006) ch 24. at para 24.1ff.
The modern approach to RJ in the United States finally emerged in theRestatement (Second) of Judgments §27 (1980) [Restatement], whichaddresses the preclusive effects of judgments in civil actions. Preclusiveeffects are limitations on the opportunity in a second action to litigate claimsor issues that have been or could have been litigated in a prior action. Ingeneral, these limitations include the rules of claim preclusion and issuepreclusion, and the concept of “privity”. See generally Allan D Vestal,Res Judicata/Preclusion (New York:Matthew Bender, 1969) [Vestal, RJ/Preclusion]; Warren Freedman, Res Judicata and Collateral Estoppel: Tools for Plaintiffs andDefendants (New York: Quorum Books, 1988); Robert C Casad,Res Judicata in a Nutshell (StPaul, Minn: West Publishing, 1976); Robert C Casad & Kevin M Clermont,Res Judicata: A Handbook on Its Theory,Doctrine, and Practice (Durham, NC: Carolina Academic Press,2001); David L Shapiro, CivilProcedure: Preclusion in Civil Actions,Turning Point Series (New York: Foundation Press, 2001); James, Hazard &Leubsdorf, supra note 1 at671-712.
See Donald J Lange, The Doctrine of ResJudicata in Canada, 2d ed (Markham, Ont: Butterworths, 2004) at4-10.
Bower, supra note 2 at para14.
Casad & Clermont, supra note 3at 5 (answering the question whether we would be better off withoutRJ).
Ibid at 5.
For instance, AC Freeman maintains that “[t]he doctrine of res judicata is aprinciple of universal jurisprudence forming part of the legal systems of allcivilized nations” (A Treatise of the Law ofJudgments, 5th ed by Edward W Tuttle (San Francisco:Bancroft-Whitney, 1925) vol 2 at 1321). Another scholar, Eliahu Harnon, writes:“It may be assumed that the need for finality of judgment is recognized by many,if not by all, systems of law” (“Res Judicata and Identity of Actions: Law andRationale” (1966) 1:4 Isr LR 539). Others write, “It seems clear that theadjudicative process would fail to serve its social and economic functions if itdid not have [the support of RJ]” (James, Hazard & Leubsdorf, supra note 1 at 674).
Yuval Sinai, “Reconsidering ResJudicata: A Comparative Perspective” 21:2 Duke J Comp & Int’lL 353 [Sinai, “Reconsidering RJ”].
Some of the difficulties have already been mentioned, see e.g. Edward WCleary, “Res Judicata Reexamined” (1948) 57:3 Yale LJ 339; Casad & Clermont,supra note 3 at 33-34. The presentarticle introduces a larger number of policy considerations in its critique ofthe rules of RJ.
James, Hazard & Leubsdorf, supra note 1 at 676, citing Charles E Clark, Handbook of the Law of Code Pleading, 2d ed(St Paul, Minn: West Publishing, 1947) ch 7 at 472-88.
Supra note 3 at 26.
English jurists have voiced criticisms of the doctrine of RJ, but theprincipal questions they raised concern the individual aspects of the doctrineand matters of detail, rather than the doctrine as a whole (see e.g., Bower,supra note 2 at paras 11-13). Inhis 1948 article, Cleary initiated a re-examination of RJ (supra note 10), but the conceptualdifficulties of the doctrine have yet to be examined thoroughly.
Infra note 65.
See James, Hazard & Leubsdorf, supranote 1 at 674-75.
See OL McCaskill, “Actions and Causes of Action” (1925) 34:6 Yale LJ 614 at638-40.
James, Hazard & Leubsdorf, supranote 1 at 674-75 [footnote omitted]. Ibid at n 6 suggests a comparison between Ernst Schopflocher(“What is a Single Cause of Action for the Purpose of the Doctrine of ResJudicata?” (1942) 21:4 Or L Rev 319) and the Restatement (supra note3, § 24). James, Hazard & Leubsdorf(supra note 1 at 674-675) point toAllan D Vestal (“Res Judicata/Claim Preclusion: Judgment for the Claimant”(1967) 62:3 Nw UL Rev 357) for additional reference.
See e.g. Andrews, Principles,supra note 2 at 503.
See Lange, supra note 4 at1.
See e.g. Vestal, RJ/Preclusion,supra note 3 at 13-15.
Arnold v National Westminster BankPlc,  2 AC 93 at 104,  2 WLR 1177 (HL (Eng)) [Arnold]. See also NH Andrews, “Case andComment” (1991) 50:3 Cambridge LJ 379 at 419.
Arnold, supra note 21 at 105.
Henderson v Henderson,  3Hare 100 at 115, 67 ER 313 (ChD), cited in Andrews, Principles, supra note 2 at 504. For an application of this requirement seeSkuse v Granada Television Ltd, 1 WLR 1156 at 1162-64 (QB).
Zuckerman, supra note 2 at para24.65. The author comments further: “Neither the discovery of new evidence thatcould not have been known before, nor a change in the law since the firstdecision, can justify reopening an adjudicated cause of action. The only way ofreviving the cause of action is by having the original judgment set aside ongrounds of fraud” (ibid [footnoteomitted]).
Lange, supra note 4.
The key principles were quoted with approval in Laufer v Canadian Investment Protection Fund,2004 CanLII 31862 at para 7 (Ont Sup Ct). For related leading decisions, seeLange, supra note 4 at 125. For the keyprinciples of issue estoppel, see ibidat 25.
In other words, the defendant must present both the entire defence relatedto the subject matter at one time, once and for all, and any relatedcounterclaim that does not form a separate and distinct cause ofaction.
A separate and distinct cause of action, however, is not governed by thecause of action estoppel and need not be brought in the same action, either as aclaim by the plaintiff or as a counterclaim by the defendant. Another keyprinciple is that the cause of action estoppel applies to the same parties andtheir privies, in the second action and in a second proceeding that is not anaction.
Supra note 4 at 139. For themeaning of a cause of action and of a separate and distinct cause of action inthe context of the Canadian cause of action estoppel, see ibid note 4 at 139-43.
James, Hazard & Leubsdorf, supra note 1 at 675.
The US Supreme Court formulated the concept of claim preclusion as follows:“[A] final judgment on the merits of an action precludes the parties or theirprivies from relitigating issues that were or could have been raised in thataction.” Allen v McCurry, 449 US 90at 94, 101 S Ct 411(8th Cir 2000).
As described by Casad & Clermont: “The old view, to which somejurisdictions still adhere, defined cause of action more narrowly in terms of asingle legal theory or a single substantive right or remedy of the plaintiff.The modern view is that a claim includes all theories’ bestowal of rights on theplaintiff to remedies against the defendant with respect to the transaction from which the action arose”(supra note 3 at 62).
See Restatement, supra note 3, §24.
Casad & Clermont, supra note 3at 62.
James, Hazard & Leubsdorf, supra note 1 at 676, citing Clark, supra note 11, ch 7 at 472-88.
See Restatement, supra note 3, § 17cmt b.
See ibid, § 17 cmt a.
James, Hazard & Leubsdorf, supra note 1 at 676.
See Restatement, supra note 3, §26; For a description of the US approach, see Vestal, RJ/Preclusion, supra note 3 at 103; Casad & Clermont, supra note 3 at 85-106. For a description ofthe approach taken in England, see Bower, supra note 2 at paras 190-92, 455-58. And for a description ofthe Canadian approach, see Lange, supranote 4 at 231-84.
Federal Rules of Civil Procedure,as amended 1 December 2010 (111th Cong, 2nd Sess). Similar rules abide in most,perhaps all, state courts. Also notice the law-equity distinction and thewillingness of American “chancellors” to correct mistakes in the ancienttradition of Chancery. For the rise of equity and the chancellor’s decree in theUnited States, see James, Hazard & Leubsdorf, supra note 1 at 16-22.
Supra note 3, § 26: Exceptions tothe general rule concerning splitting.
See e.g. Allan D Vestal, “Rationale of Preclusion” (1964) 9:1 Saint LouisULJ 29 [Vestal, “Rationale”]; Harnon, supra note 8 at 542-50; Bower, supra note 2 at paras 10-15; Vestal, RJ/Preclusion, supra note 3 at 7-12; Cleary, supra note 10; Andrews, Principles, supra note2 at 511; Richard A Posner, “An Economic Approach to Legal Procedure andJudicial Administration” (1973) 2:2 J Legal Stud 399 at 444-45; Casad &Clermont, supra note 3, ch 3 at 29ff;James, Hazard & Leubsdorf, supranote 1 at 671-74; Lange, supra note 4at 4-9.
See e.g. Bower, supra note 2 atpara 10; Vestal, “Rationale”, supranote 43; Vestal, RJ/Preclusion,supra note 3 at 8-10; James, Hazard& Leubsdorf, supra note 1 at675.
See e.g. Carl Zeiss Stiftung v Rayner &Keeler Ltd (1966),  AC 853 at 933,  1 All ER 536 (HL(Eng)). In England, Lord Simon of Glaisdale expressed this idea in The Ampthill Peerage (1976),  AC 547 at575-76,  2 WLR 777 (HL (Eng)).
This rationale of RJ was formulated more than four centuries ago by LordCoke in the Ferrer’sCase,  6 Co Rep 7a at 8b-9a, 77ER 263 (KB) Traditionally, Canadian courts also base RJ on these two policyconsiderations, see Lange, supra note 4at 4-6.
These policy considerations have also been expressed by Canadian courts, seeibid at 7.
See Vestal, “Rationale”, supra note43 at 31-32; Vestal, RJ/Preclusion,supra note 3 at 10-12.
Andrews, Principles, supra note 2 at 511.
Kenneth E Scott, “Two Models of the Civil Process” (1975) 27:3 Stan L Rev937.
Ibid at 937-38.
Ibid at 938-39.
Ibid at 950.
See James, Hazard & Leubsdorf, supra note 1 at 685.
Supra note 3; ibid, § 18.
See ibid, § 26; For a descriptionof the US approach see Vestal, RJ/Preclusion, supranote 3 at 103; Casad & Clermont, supra note 3 at 85-106. For a description of the Englishapproach, see Bower, supra note 2 at190-92, 455-58. For a description of the Canadian approach see Lange, supra note 4 at 231-84.
See James, Hazard & Leubsdorf, supra note 1 at 687.
Ibid. See also Geoffrey C Hazard,Jr, “An Examination Before and Behind the ‘Entire Controversy’ Doctrine” (1996)28:1 Rutgers LJ 7; Howard M Erichson, “Of Horror Stories and Happy Endings: TheRise and Fall of Preclusion-Based Compulsory Party Joinder Under the New JerseyEntire Controversy Doctrine” (1999) 9:3 Seton Hall Const LJ 757.
See generally Zuckerman, supra note2 ch 1 at para 1.1; Civil ProcedureRules1998 (UK) [CPR].
UK, Access to Justice: Interim Report to theLord Chancellor on the Civil Justice System in England and Walesby The Right Honourable the Lord Woolf (London, UK: Woolf Inquiry Team, 1995);UK, Access to Justice: Final Report to the LordChancellor on the Civil Justice System in England and Wales byThe Right Honourable the Lord Woolf (London, UK: HMSO, 1996) [Woolf, FinalReport].
Supra note 64.
See ibid at 1.4(2)(1).
See Zuckerman, supra note 2 at para1.100 [footnote omitted].
Ibid at para 1.101. Also, seegenerally ibid at paras1.98-1.112.
Baron v Lovell (1999),  PIQR20 at 27, CPLR 630 (EWCA (CivD), cited in Zuckerman, supra note 2 at para 1.100.
See ibid at para 1.104.
It also dramatically reduces the chances of reaching a settlement, as shownin Part IV.
Kate Stith, “The Risk of Legal Error in Criminal Cases: Some Consequences ofthe Asymmetry in the Right to Appeal” (1990) 57:1 U Chicago L Rev 1. See alsoUzi Segal & Alex Stein, “Ambiguity Aversion and the Criminal Process” (2006)81:4 Notre Dame L Rev 1495.
See Wayne R LaFave et al, CriminalProcedure, 5th ed (St Paul, Minn: Thomson West, 2009) at 1201-04,1222-26.
Stith, supra note 74 at17-27.
Ibid at 29-32.
Ibid at 29.
James, Hazard & Leubsdorf, supra note 1 at 687.
Part III addresses the way in which litigation costs affect the conduct oflitigation. At the same time, one could ask: What about the costs and risks offiling meritless claims? If they are truly meritless, would the plaintiff notfear retaliation from the court (either in costs or in the form of a negativeattitude on the part of the judge)? In economic terms, if the claim has anegative net present value (NPV), the fact that the claimant would not be ableto file it in the future will not persuade him to file it today. In other words,the argument is that a net benefit must potentially flow from the claim for itto be filed at any time.
Supra note 3 (exceptions to thegeneral rule concerning splitting).
This exception is explained in ibid, § 26 cmt b:
Express reservation by the court(Subsection (1)(b)). It may appear in the course of an actionthat the plaintiff is splitting a claim, but that there are special reasonsthat justify his doing so, and accordingly that the judgment in the actionought not to have the usual consequences of extinguishing the entire claim;rather the plaintiff should be left with an opportunity to litigate in asecond action that part of the claim which he justifiably omitted from thefirst action. A determination by the court that its judgment is “withoutprejudice” (or words to that effect) to a second action on the omitted partof the claim, expressed in the judgment itself, or in the findings of fact,conclusions of law, opinion, or similar record, unless reversed or setaside, should ordinarily be given effect in the second action.
Ibid, § 25 cmt h.
Casad & Clermont, supra note 3at 101. The author gives an example of such special circumstances: “[S]uch aswhen only at trial could the plaintiff’s counsel perceive the breadth of theclaim” (ibid).
As explained in the Restatement,supra note 3, §25 cmt h:
When an enforceable contract has existed between plaintiff anddefendant, and the plaintiff asserts that he has performed in accordancewith the terms of the contract, but that the defendant has failed to performhis corresponding duties, the remedies or forms of relief that can typicallybe claimed by the plaintiff are recovery of the value of the defendant’spromised performance less the value of any as yet unperformed part of theplaintiff’s promised performance (called an action for breach of contract),or recovery of the value of what the plaintiff has given in performance ofthe contract (called an action for restitution). The plaintiff may pursueboth remedies alternatively in one action, but whether he chooses to do soor sues for only one of the two remedies, a judgment in the action whichextinguishes the claim under the rules of merger or bar precludes theplaintiff from another action on the same transaction.
For the application of claim preclusion in breach of contract cases, seealso James, Hazard & Leubsdorf, supranote 1 at 692-93.
See generally Danyluk v AinsworthTechnologies, 2001 SCC 44 at para 33,  2 SCR 460; rev’g(1998), 42 OR (3d) 235, 167 DLR (4th) 385 (CA); Toronto (City) v Canadian Union of Public Employees, Local 79(2001), 55 OR (3d) 541 at 572, 205 DLR (4th) 280 (CA) [Toronto], aff’d 2003 SCC 63 at paras 23-32, 3 SCR 77. See also Lange, supranote 4 at 172-74.
See ibid at 173 (analyzing thedecision of Toronto, supra note 86).
See Lange, supra note 4 at174.
In secular Israeli law it is the common law, broad-scope concept of RJ thatusually applies. See Harnon, supra note8 at 541.
CA 329/73 Stefania Hotel Ltd v MillerEstate,  IsrSC 28(1) 19 at 20, paras 5-6 (Israeli SupremeCourt sitting for the Civil Court of Appeal) [Stefania Hotel] [translated by author]. For a discussion of theeffects of this theory on Israeli law, see Benjamin Rotenberg, “SplittingRemedies” (in Hebrew) (1987) 16 Mishpatim 390 at 397.
Stefania Hotel, supra note 90.
The legal basis of the decision is the court’s authority to allow splittingthe remedies flowing from one cause of action according to Rule 45 of theCivil Law Procedure Regulations5744-1984, 7th ed (Haifa: AG Publications, 2005).
Assuming it is an hypothesis, we should also consider the argument to thecontrary, that although a more focused or confined action may be less“stimulating” than an “kitchen sink” action, adoption of the Stefania Hotel model would also increase thepossibility of multiple actions—which could, presumably, create their own levelof “stimulation” because in each case success would depend on the adjudicationof the single cause of action being asserted.
Stefania Hotel, supra note 90.
This will be explained in Part IV.
Restatement, supra note 3, §25 cmtb.
James, Hazard & Leubsdorf, supra note 1 at 688-92. See also ibid (“[p]ractical and policy problems [caused by claimpreclusion] can arise in almost any type of tort litigation” at 688).
In the first action the court permitted claim splitting, as applied in thecontemporary US legal system.
Vestal, RJ/Preclusion, supra note 3 at 98.
Ibid at 100 [footnoteomitted].
Judith Resnik, “Tiers” (1984) 57:6 S Cal L Rev 837 at 857 [Resnik “Tiers”].See also James, Hazard & Leubsdorf, supra note 1, ch 6 at 359-83; Zuckerman, supra note 2 at paras 1.91-1.93.
Resnik, “Tiers”, supra note 102 at857.
It has been noted that none of the models incorporate the effects ofpreclusion. See “Exposing the Extortion Gap: An Economic Analysis of the Rulesof Collateral Estoppel”, Note (1992) 105:8 Harv L Rev 1940 at 1942-43, n 17[“Exposing the Extortion Gap”]. See also Steven Shavell, “Suit, Settlement, andTrial: A Theoretical Analysis Under Alternative Methods for the Allocation ofLegal Costs” (1982) 11:1 J Legal Stud 55; Lucian Arye Bebchuk, “Litigation andSettlement Under Imperfect Information” (1984) 15:3 RAND J Econ 404.
See e.g. “Exposing the Extortion Gap”, supra note 104 at 1953-55.
See e.g. Lucian Arye Bebchuk, “Suing Solely to Extract a Settlement Offer”(1988) 17:2 J Legal Stud 437.
Whereas the effects of the rules on the chances of reaching a settlement arediscussed separately in Part IV.
Cleary, supra note 10 at 348[footnote omitted].
For another example of the tension between individual and public needs seeResnik, “Tiers”, supra note 102 at857.
James, Hazard & Leubsdorf, supra note 1 at 674.
For a list of procedural efficiency and fairness factors favouringpreclusion, see Casad & Clermont, supra note 3 at 31-33.
Ibid at 31.
James, Hazard & Leubsdorf, supra note 1 at 686-87. See also Vestal, RJ/Preclusion, supra note 3 at 103.
Supra note 3 at 30. Also note thefollowing observation by Casad & Clermont:
Moreover, although some arguments that draw instead on fairness do favorpreclusion, powerful fairness concerns cut the other way, counseling eitherto stop the rule of res judicata short of the particular case or to createan exception to the rule of res judicata for the particular case. Finally,res judicata does not exist in a procedural vacuum, but responds to specificsubstantive policies as well.ibid at 30-31
Ibid at 33.
Ibid at 33-34.
See e.g. US, Rand—The Institute for Civil Justice, Costs of the Civil Justice System: Court Expendituresfor Processing Tort Cases, R-2888-ICJ, by James S Kakalik &Abby Eisenshtat Robyn (Santa Monica, Cal: Rand—The Institute for Civil Justice,1982) at vii <http://www.rand.org/pubs/reports/R2888/>.
The survey brought in the text above is based on James, Hazard &Leubsdorf, supra note 1 at364-66.
Ibid at 364.
We do not compare, however, the cost of litigation under the rules of causeof action estoppel with the possibility of multiple actions corresponding tomultiple causes of action (the latter also possible only if we pare down thecause of action estoppel rule). In this scenario, presumably the economics mayturn out to favour litigation under the rules of cause of actionestoppel.
James, Hazard & Leubsdorf, supra note 1 at 686-87.
See e.g. Alon Klement & Roy Shapira, “Justice and Efficiency in CivilProcedure—A New Perspective” (in Hebrew) (2007) 7 Law & Business Review75.
As Steven Shavell explains, “Under the economic approach to the analysis oflaw, two basic types of questions about legal rules are addressed. The firsttype is descriptive, concerning theeffects of legal rules. ... Given the characterization of individuals’ behavioras rational, the influence of legal rules on behavior can be ascertained”(Foundations of Economic Analysis ofLaw (Cambridge, Mass: Belknap Press, 2004) at 1).
Klement & Shapira, supra note124 at 102. For an analysis of the influences of issue preclusion see “Exposingthe Extortion Gap”,supra note 104.
On uncertainty costs in general see James, Hazard & Leubsdorf, supra note 1 at 365.
The above discussion, in Part III.A, focused on the ex post effects of broad-scope cause ofaction estoppel on the constitutional right to access to judicialdecision-making—the prohibition of initiating further claims on behalf of thefirst cause of action. The analysis in this section draws attention to a moreharmful effect on access to judicial decision-making.
Supra note 3 at 34.
James, Hazard & Leubsdorf, supra note 1 at 365.
Supra note 3 at 31.
Ibid at 31.
See e.g. Samuel R Gross & Kent D Syverud, “Don’t Try: Civil JuryVerdicts in a System Geared to Settlement” (1996) 44:1 UCLA L Rev 1; MarcGalanter & Mia Cahill, ‘“Most Cases Settle’: Judicial Promotion andRegulation of Settlements” (1994) 46:6 Stan L Rev 1339. Whether active judicialpromotion of settlements is likely to be successful or desirable is anotherquestion, the answer to which depends on the type of intervention.
See Owen M Fiss, “Against Settlement”, Comment, (1984) 93:6 Yale LJ1073.
See Stephen C Yeazell, “The Misunderstood Consequences of Modern CivilProcess”, Essay,  3 Wis L Rev 631; Judith Resnik, “Trial as Error,Jurisdiction as Injury: Transforming the Meaning of Article III” (2000) 113:4Harv L Rev 924. For a summary of the various approaches to resolution withoutadjudication, see Owen M Fiss & Judith Resnik, Adjudication and its Alternatives: An Introduction to Procedure(New York: Foundation Press, 2003) at 431-532.
See Jethro K Leiberman & James F Henry, “Lessons from the AlternativeDispute Resolution Movement” (1986) 53:2 U Chicago L Rev 424 at 432; JudithResnik, “Failing Faith: Adjudicatory Procedure in Decline” (1986) 53:2 U ChicagoL Rev 494 at 536-37.
See Zuckerman, supra note 2 at para1.116.
See generally ibid at paras1.113-1.122; CPR, supra note64.
Woolf, Final Report, supra note 65 at 4.
See Zuckerman, supra note 2 at para1.113; CPR, supra note 64.
See Zuckerman, supra note 2 at para1.113.
Represented by the pre-action protocols. See ibid at paras 1.104-1.112.
Consisting of economic sanctions, normally in the form of adverse costs. Seeibid at para 1.114.
Ibid at para 1.100.
See Robert A Baruch Bush & Joseph P Folger, The Promise of Mediation: Responding to Conflict ThroughEmpowerment and Recognition in Jeffrey Z Rubin, ed, The Jossey-Bass Conflict Resolution Series(San Francisco: Jossey-Bass, 1994) at 67. See also Susan S Silbey & Sally EMerry, “Mediator Settlement Strategies” (1986) 8:1 Law & Pol’y 7 at16.
For example, studies on divorce disputes show that mediators have a tendencynot to discuss issues concerning intimate relations between spouses, such astrust and self-evaluation, although these issues have been raised by theparties. The mediators prefer to concentrate on factual issues, such as money,property, and child custody rather than dealing with the spouses’ privaterelations. See Bush & Folger, supranote 145 at 67, citing William A Donohue, Communication, Marital Dispute, and Divorce Mediation(Hillsdale, NJ: Lawrence Erlbaum Associates, 1991) at160, 164. For anotherapproach, see Silbey & Merry, supranote 145 at 16-17.
See James A Wall, Jr & Dale E Rude, “Judicial Mediation: Techniques,Strategies, and Situational Effects” (1985) 41:2 Journal of Social Issues 47 at56.
Woolf, Final Report, supra note 65 at 107.
See Carrie Menkel-Meadow, “Whose Dispute Is It Anyway?: A Philosophical andDemocratic Defense of Settlement (In Some Cases)”, Essay, (1995) 83:7 Geo LJ2663.
See Eric D Green, Jonathan B Marks & Ronald L Olson, “Settling LargeCase Litigation: An Alternative Approach” (1978) 11:3 Loy LA L Rev 493.
See Edward Brunet & Charles B Craver, Alternative Dispute Resolution: The Advocate’s Perspective, 2ded (Newark, NJ: LexisNexis, 2001) at 1-3.
See UK, The Admiralty & Commercial CourtsGuide, 9th ed, by The Hon Mr Justice David Steel & The HonMrs Justice Gloster DBE (London: Her Majesty’s Courts & Tribunals Service,2011) (“[i]n appropriate cases and with the agreement of all parties the courtwill provide a without-prejudice, non-binding, early neutral evaluation (‘ENE’)of a dispute or of particular issues” at s G2 ). See also Zuckerman, supra note 2 at para 1.120.
The present article does not argue that a settlement is desirable from asocial perspective. On this issue, see e.g. Fiss, supra note 134; Carrie Menkel-Meadow, “For and AgainstSettlement: Uses and Abuses of the Mandatory Settlement Conference”, Essay,(1985) 33:2 UCLA L Rev 485. For a summary of the variant approaches towardssettlement, see Fiss & Resnik, supra note 135 at 440-95.
This view is based on concepts of economic analysis of compromise. See e.g.Shavell, supra note 104.
Sir Leonard Hoffmann, “Changing Perspectives on Civil Litigation” (1993)56:3 Mod L Rev 297 at 305. See also Julius Byron Levine, Discovery:A Comparison Between English and American CivilDiscovery Law with Reform Proposals (Oxford: Clarendon Press,1982) at 1; William H Speck, “The Use of Discovery in United States DistrictCourts” (1951) 60:7 Yale LJ 1132.
Michael E Solimine, “Revitalizing Interlocutory Appeals in the FederalCourts” (1990) 58 Geo Wash L Rev 1165 at 1180. For examples of this literature,Solimine refers to: Richard A Posner, EconomicAnalysis of Law, 3d ed. (Boston: Little, Brown and Company, 1986)at 522-26; Hon Eugene F Lynch & Lawrence C Levine, “The Settlement ofFederal District Court Cases: A Judicial Perspective” (1988) 67:2 Or L Rev 239at 246-48.
For the factors of uncertainty and their effect on the chances of reaching asettlement, see e.g. James, Hazard & Leubsdorf, supra note 1 at 368-75.
Solimine, supra note 156 at 1180.For examples of these sources, Solimine refers to: D Marie Provine, Settlement Strategies for Federal DistrictJudges (Washington, DC: Federal Judicial Center, 1986) at 27-28;Honourable Hubert L Will, Honourable Robert R Merhige, Jr & Honourable AlvinB Rubin, “The Role of the Judge in the Settlement Process” (1978) 75 FRD 203 at206-11.
Solimine, supra note 156 at 1180.Solimine further illustrates his answer: “For example, the parties may agree onliability but be uncertain as to damages. Others may not agree on either, butone or both parties may be particularly risk-averse, and simply not willing totake the risk that their estimates are incorrect” (ibid at 1180-81).
Ibid at 1181.
For a summary of the literature see Eugene M Caruso, Daniel T Gilbert &Timothy D Wilson, “A Wrinkle in Time: Asymmetric Valuation of Past and FutureEvents” (2008) 19:8 Psychological Science 796. The authors present two reasonswhy people might rationally value future events more than past events: “First,knowledge of the future is often less certain than knowledge of the past, andthe ... [temporal value asymmetry] may reflect attempts to compensate for thisfact. ... Second, valuations can change the future, but not the past” (ibid at 796). The authors argue that temporalvalue asymmetry “occurs even when these rational considerations are moot”(ibid). Another psychological studydemonstrates other implications of decision making under uncertainty regardingfuture events (Amos Tversky & Eldar Shafir, “The Disjunction Effect inChoice Under Uncertainty” (1992) 3:5 Psychological Science 305). Tversky &Shafir argue that in the presence of uncertainty, people are often reluctant tothink through the implications of each outcome and, as a result, may violateSavage’s sure-thing principle (Savage’s sure-thing principle is one of the basicaxioms of the rational theory of decision making under uncertainty. Theprinciple states that “if prospect x ispreferred to y knowing that Event Aoccurred, and if x is preferred toy knowing that A did not occur,then x should be preferred to y even when it is not known whether Aoccurred” (ibid at 305)). The authorspresent examples in which “the decision maker has good reasons for acceptingx if A occurs, and differentreasons for accepting x if A does notoccur. Not knowing whether or not A occurs, however, the decision maker may lacka clear reason for accepting x and mayopt for another option” (ibid). Theysuggest that, “in the presence of uncertainty, people are often reluctant tothink through the implications of each outcome and as a result may violate [thesure-thing principle]” (ibid).
Oren Bar-Gill, “Seduction by Plastic” (2004) 98:4 Nw UL Rev 1373 at1375.
Ibid at 1376.
James, Hazard & Leubsdorf, supra note 1 at 674.
Sinai, “Reconsidering RJ”, supranote 9.
Supra note 1 at 673.
As noted by James, Hazard & Leubsdorf:
[T]here is, in principle, no reason why the rules of res judicata couldnot be limited to the narrow question whether the prior action actuallydecided the issues necessarily involved in awarding the judgment. This couldbe called a minimal concept of res judicata; without it, a judgment wouldnot conclusively decide anything. It seems clear that the adjudicativeprocess would fail to serve its social and economic functions if it did nothave this minimal effectibid at 674
Furthermore, the authors stress that an appeal could be—but is not—anopportunity for the comprehensive reconsideration of the case. Motions forextraordinary relief from judgments can serve a similar function, but they donot because their scope is much more limited (ibid at 742, 781-92).
Courts: A Comparative and PoliticalAnalysis (Chicago: University ofChicago Press, 1981) at vii.
I prefer to focus on Germany rather than on other civil law jurisdictionsbecause many jurists consider it to be a fine representative of theEuropean-Continental system of civil procedure, which is valued more highly byscholars than the United States common law of civil procedure. See e.g. John HLangbein, “The German Advantage in Civil Procedure” (1985) 52:4 U Chicago L Rev823. See also Benjamin Kaplan, Arthur T von Mehren & Rudolf Schaefer,“Phases of German Civil Procedure” (1958) 71:7-8 Harv L Rev 1193 &1443.
Modern analysis of procedural rules in widely divergent legal systems hasprompted many to question—and sometimes change—the rules in their own legalsystems, often importing these rules from other systems. A central axis ofcomparison runs between the adversarial system practiced in common lawjurisdictions (England and the United States) and the inquisitorial systempracticed on the European Continent. There is, however, an additional axis ofcomparison of particular interest that extends between theadversarial-inquisitorial systems on the one hand and the procedural system ofJewish law on the other. This comparison is based on a body of original legalliterature that takes into account not only legal rules but also culturaldifferences between Judaism and dominant Western society. Some scholars are ofthe opinion that Jewish law provides a basis for the reform and development ofWestern law (see e.g. H Patrick Glenn, LegalTraditions of the World: Sustainable Diversity in Law, 3d ed (NewYork: Oxford University Press, 2007) at 120-22). In the United States, somescholars use, and often reinterpret, Jewish law to provide a counter-model todominant conceptions in contemporary US legal theory. See Suzanne Last Stone,“In Pursuit of the Counter-Text: The Turn to the Jewish Legal Model inContemporary American Legal Theory” (1993) 106:4 Harv L Rev 813. For an exampleof comparative research dealing with procedural law, see Yuval Sinai, “TheDoctrine of Affirmative Defense in Civil Cases—Between Common Law and JewishLaw” (2008) 34:1 NCJ Int’l Law & Com Reg 111; Sinai, “Reconsidering RJ”,supra note 9.
See generally Peter L Murray & Rolf Stürner, German Civil Justice (Durham, NC: CarolinaAcademic Press, 2004) at 355-66. See especially ibid at 355, n 245. In the German civil system, only a judgmentthat is not subject to further appeal stands as conclusive adjudication and issubject to RJ (ibid at 355-56). Therationale is that wherever there is a multi-level apparatus of justice, as inthe continental system in general (see Mirjan R Damaska, The Faces of Justice and State Authority: A ComparativeApproach to the Legal Process (New Haven: Yale University Press,1986) at 28-29), and in the German civil justice system in particular (seeMurray & Stürner, supra at367-418), original decisions can be treated as tentative, and the need fordecision stability is felt only after the highest authority has spoken (seeDamaska, supra at 145).
See Murray & Stürner, supranote 174 at 355.
Ibid at 357.
Although it poses some difficulties from the perspective of cost-efficiency,as discussed at length in Part IV of Sinai, “Reconsidering RJ”, supra note 9.
See ibid at Part V. For a generaloverview of some of the relevant sources in Jewish Law see Prof Nahum Rakover,A Guide to the Sources of JewishLaw (Jerusalem: Library of Jewish Law, 1994); Menachem Elon,JewishLaw: History, Sources, Principles,translated by Bernard Auerbach & Melvin J Sykes (Philadelphia:Jewish Publication Society, 1994) vol 3. In general, the principles and rules ofJewish law are based on the Scripture (Rakover, supra at 15). Some rules are mentioned explicitly, but othersare only implied. All are elucidated in the teachings of the Tanna’im and Amora’im—the rabbis of the Mishnah and Talmud—andpresented systematically in the codes. The Mishnah is the first topical compilation of the Oral Law(Torah shebe’al peh), completedaround 200 CE (ibid at 33). For some300 years after the redaction of the Mishnah, approximately 200-500 CE, Jewish scholarship wasdevoted primarily to the study, clarification, and application of the Mishnah (ibid at 43). The scholars of this period, known as the Amora’im, wrote the Talmud. Halakhic literature after the periodof the Talmud includes codes, halakhicglosses, responsa literature, and court decisions (ibid at 61). The main codes are the Maimonides code Mishneh Torah (1135-1204), Tur (1270-1340), and Shulhan Arukh (1488-1575), which isuniversally accepted as the authoritative code of Jewish law. Thus, over manygenerations, a comprehensive legal system has developed based on the Scriptureas elaborated by exegesis and amplification.
As I showed in Part V of Sinai, “Reconsidering RJ”, supra note 9, in Jewish law a judgment isalways subject to revision—normally by the court that rendered it in the firstplace—if new evidence has come to light disproving the facts that the judgmentwas based on, provided that the party seeking to adduce such new evidence is notbarred from doing so. Every judgment is also subject to revision for errors oflaw. The traditional, ancient concept of non-finality of judgments in Jewish lawalso applies in the contemporary rabbinical courts authorized in the modernState of Israel. Nevertheless, it bears mentioning that the lack of finality inJewish law, as acknowledged, arose at a time when there was no appellate levelcourt in the Jewish legal system. After an appellate court process wasestablished in Israel, the nature of finality changed—although a broaderresidual discretion is left to trial adjudicators in religious courts to reopencases that have not yet been appealed.
Rabbi Shimon ben Tzemach Duran, ShutHa’Tashbetz [ResponsaTashbetz], revised ed, (Lvov: np, 1891) vol 2 at § 2, online: Hebrew Books<http://HebrewBooks.org>.
The chances of seeking a settlement under the common law doctrine of causeof action estoppel are not high, see text accompanying supra note 144.
Rabbi Yosef Karo, Shulhan ‘Aruk[Code of Hebrew Law], translated by Rabbi Dr Chaim N Denburg (Montreal:Jurisprudence Press, 1955) vol 4: HoshenHa-mishpat [Breastplate of Judgment] at § 24 (containing originalHebrew text (Lemberg ed, 1911) and glosses of Rabbi Moses Isserles) [translatedby author]; Rabbi Yisroel Yisser Isserlin, SeferPischei Teshuvah (in Hebrew) (Vilnius: np, 1874) ad loc, § 4[Pischei Teshuvah].
See Rabbi Shlomo ben Avraham ben Aderet, Sheʼelot u-teshuvotha-Rashba [ResponsaRashba], ed by Aharon Zelznik (Jerusalem: Jerusalem Institute, 733 [2005-06])vol 1 at §1077 [translated by author].
See Rabbi Shlomo ben Avraham haCohen, ShutMaharashach Shlishi [Responsa Maharashach], (Thessaloniki, np:1730) vol 3 at § 26, online: Hebrew Books <http://HebrewBooks.org>[translated by author].
Rabbi David ben Solomon Ibn Zimra, ShuthaRadvaz [Responsa Radbaz], revised ed (Jerusalem: np, 1882) vol4 at §1281, online: Hebrew Books <http://HebrewBook.org>[translated by author].
Therefore there is no contradiction between Rashbatz and Radbaz, asexplained in Pischei Teshuvah,supra note 184, § 4 (near end ofsection).
See Rotenberg, supra note 90 at399.
RJ law itself contains some flexibility to permit relitigation, but thelimitations on relitigation are strict and strictly enforced, and the discretionof the courts is narrow. See James, Hazard & Leubsdorf, supra note 1 at 675.
See Part II of Sinai, “Reconsidering RJ”, supra note 9.
For the wider modern scope of finality see James, Hazard & Leubsdorf,supra note 1 at 674-75.
See Casad & Clermont, supranote 3 at 36. Exceptions to RJ are indicated in the referencesmentioned at supra note 40. Forexample, English law provides that new evidence unavailable at the time of trialcan constitute under certain circumstances an exception to the application ofRJ. See e.g. Andrews, Principles,supra note 2 at 505.
Although, in many cases, all the factors appear to support a general rule ofpreclusion, in any individual case, these same factors may call fornon-preclusion, justifying a special exception to the rule.
For a summary of the different definitions see e.g. James, Hazard &Leubsdorf, supra note 1 at 684-88. Seealso Cleary, supra note 10 at 341-42(the author criticizes the extensive efforts to define cause ofaction).
See Harnon, supra note 8 at550-59.