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Semtek Int'l Inc. v. Lockheed Martin Corp. - 531 U.S. 497, 121 S. Ct. 1021 (2001)

Rule:

Federal common law governs the claim-preclusive effect of a dismissal by a federal court sitting in diversity.

Facts:

Lockheed Martin Corp. (“Lockheed”) removed Semtek International, Inc.'s (“Semtek”) California state-court suit to a California Federal District Court based on diversity of citizenship, and successfully moved to dismiss the case "on the merits" as barred by California's statute of limitations. Petitioner then brought suit in a Maryland Circuit Court, alleging the same causes of action for breach of contract, which were not time barred under Maryland's statute of limitations. That court dismissed the case on the ground of res judicata. In affirming, the Maryland Court of Special Appeals held that, regardless of whether California would have accorded claim-preclusive effect to a statute-of-limitations dismissal by one of its own courts, the California federal court's dismissal barred the Maryland complaint because the res judicata effect of federal diversity judgments is prescribed by federal law, under which the earlier dismissal was on the merits and claim-preclusive.

Issue:

Did the federal court's dismissal preclude the action in the alternate forum state?

Answer:

No

Conclusion:

On certiorari, the Supreme Court of the United States held that the federal court's dismissal did not necessarily preclude the action in the alternate forum state. The dismissal on the merits, based on the statute of limitations, merely barred petitioner's remedy without extinguishing its substantive rights, and thus only precluded petitioner from pursuing the same claim in the dismissing court. Federal common law governed the effect of the dismissal by the federal court sitting in diversity, and such law required that the claim-preclusive effect of the federal judgment was governed by the law of claim preclusion of the federal court's forum state. Noting that no conflict with potential federal interests exists in the present case, the Court reversed the judgment.

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