A plaintiff files a lawsuit in federal court against a defendant, alleging breach of contract. The court reaches a judgment on the merits, holding that the defendant did not breach the contract. Five months later, the plaintiff files a new lawsuit in a different federal court against the same defendant, alleging fraudulent inducement related to the same contract. The defendant moves to dismiss, arguing the lawsuit is barred. How should the court rule?
The court should deny the motion to dismiss because the new case involves a different legal theory than the prior case.
The court should deny the motion to dismiss because fraudulent inducement was not specifically addressed in the prior judgment.
The court should grant the motion to dismiss because the claim arises from the same transaction and could have been litigated in the prior case.
The court should grant the motion to dismiss because issue preclusion bars the plaintiff from retrying whether the contract was breached.
The correct answer is grounded in the doctrine of claim preclusion (res judicata), which prevents a party from relitigating claims that were litigated or could have been litigated in a prior case where a final judgment was rendered on the merits. Here, both lawsuits arise from the same transaction—the contract—and the fraudulent inducement claim could have been brought in the first case. The incorrect answers misapply the doctrines of claim and issue preclusion, as they either misunderstand the transactional test used to determine the same claim or incorrectly argue that a different legal theory bypasses preclusion.
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