Exciting res judicata issue headed for New York Court of Appeals

Well, maybe not exciting, but important. This case presents a dilemma. Plaintiff says she was denied overtime wages in violation of the Fair Labor Standards Act and the New York Labor Law. But her federal lawsuit was not her first go-round on this issue. She had previously filed an action in small claims court for nonpayment of wages, and that court awarded her $1,000. Does that mean plaintiff cannot now sue again in federal court?

The case is Simmons v. Trans Express Inc., issued on April 13. We got ourselves a res judicata problem. That's a Latin phrase for "another court already took up this issue, so you can't raise it here." Under New York City Civil Court Act section 1808, the res judicata statute pertaining to New York City small claims judgments,

A judgment obtained under this article shall not be deemed an adjudication of any fact at issue or found therein in any other action or court; except that a subsequent judgment obtained in another action or court involving the same facts, issues and parties shall be reduced by the amount of a judgment awarded under this article.

One interpretation of this section is that Section 1808 narrows the preclusive effects of res judicata for small claims judgment and allows for subsequent litigation of claims arising from the same or similar facts as those arising from the small claims actions. Except that your small claims judgment reduces the federal judgment so you don't recover twice. That's how plaintiff sees it. The Second Circuit agrees that plaintiff's interpretation "has persuasive force." But the appellate divisions have reached different interpretations. The confusion seems to turn on whether the courts think the second lawsuit raises claims that are sufficiently related to the small claims actions. The Second Circuit (Hall, Sullivan and Bianco), writes:

We are thus left to survey a landscape of conflicting Appellate Division decisions. All the New York courts that have interpreted Section 1808 agree that it has some preclusive effect, despite the statute’s clear language that “a subsequent judgment obtained in another action or court involving the same facts, issues and parties” would seemingly not be precluded but merely be “reduced by the amount of a judgment awarded” in small claims court. However, the New York courts do not agree on the details of Section 1808’s preclusive effect. On the one hand, the Second Department interprets Section 1808 not to preclude a plaintiff from asserting claims in Supreme Court that arise out of the same facts or occurrences as claims previously asserted in small claims court. On the other hand, the First and Third Departments interpret Section 1808 to bar such claims.

When the Second Circuit is confronted with a state law issue that has not clearly been resolved in the state courts, it certifies the issue to the New York Court of Appeals, which can then issue a definitive ruling. That is what the Second Circuit does here. And that's where this issue is now headed.