Circuit weighs in on res judicata, the FLSA, and small claims court

This case looks at what happens when you sue someone in small claims court for your overtime money and then sue the employer in federal court under the Fair Labor Standards Act and the New York Labor Law. The Court of Appeals says the small claims action triggers claim preclusion principles. In other words, res judicata!

The case is Simmons v. Trans Express, LLC, issued on October 26. This case was originally argued in the Second Circuit in January 2020. The Court of Appeals certified this case for review by the New York Court of Appeals in April 2020 because the Second Circuit wanted a definitive state court ruling on the applicability of the New York Civil Court Act, which governs the preclusive effect of judgments rendered by a small claims court. That law says as follows:

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.

After the small claims court awarded Simmons $1,000 in her case against Trans Express for lost wages, she filed suit in federal court under the FLSA and the state Labor Law, under which she would most likely recover more damages. 

After the Second Circuit sent this case to the New York Court of Appeals for definitive ruling, the latter court said that, under the Civil Court Act, "ordinary rules of claim preclusion apply to the judgments of the small claims court." Claim preclusion is the same thing as res judicata, which is Latin for "the judgment in one court means you can't bring the same case in a different court," even if the second court might give you more money. In other words, one court to a customer.

With the case back in the Second Circuit, the court then applies traditional res judicata principles in determining whether Simmons can maintain the claim in federal court. She cannot. Prior cases have held that a small claims judgment from a wrongful discharge and defamation claim prevents the litigant from bringing a national origin discrimination claim arising from the same events in a different court. Another case holds that you cannot sue in one court for age discrimination when you've already sued for defamation in a different court. These holdings convince the Second Circuit (Sullivan and Bianco) that Simmons cannot maintain this federal action.

While Simmons argues that she actually sued in small claims court for wrongful discharge, making that case different from the federal action under the FLSA and NYLL, the Second Circuit says that, even if that were the case, we would still have claim preclusion, as both claims still arose from the same "transaction." 

What about the fact that Small Claims Court cannot award you more than $5,000, and the federal claims have a greater value than that? No matter, the Second Circuit says. Courts in New York have already held that "the small claims court's limited damages jurisdiction alters the preclusive effect of judgments."  

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