Is someone who was not himself or herself (or itself, in the case of an entity) a party in a prior lawsuit involving the same matter barred from litigating it in a second lawsuit? It depends. The key issue is privity -- or no privty. But what does "in privity" mean for purposes of res judicta? That may depend too. Apparently the (case) law does not give a straight answer, or - to use the apposite metaphor -- the courts of appeals have not established a bright-line rule.
RES JUDICATA—APPLICABLE LAW
Res judicata precludes relitigation of claims that have been finally adjudicated, or that arise out of the same subject matter and that could have been litigated in the prior action. Amstadt v U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996). For res judicata to apply, there must be (1) a prior final judgment on the merits by a court of competent jurisdiction; (2) identity of parties or those in privity with them; and (3) a second action based on the same claims that were raised or could have been raised in the first action. Citizens Ins. Co. of Am. v. Daccach, 217 S.W.3d 430, 449 (Tex. 2007). The doctrine seeks to bring an end to litigation, prevent vexatious litigation, maintain stability of court decisions, promote judicial economy and prevent double recovery. Id.
Generally, people are not bound by a judgment in a suit to which they were not parties. Amstadt, 919 S.W.2d at 652. The doctrine of res judicata creates an exception to this rule by forbidding a second suit arising out of the same subject matter of an earlier suit by those in privity with the parties to the original suit. Id. at 652-53. The purposes of the exception are to ensure that a defendant is not twice vexed for the same acts, and to achieve judicial economy by precluding those who have had a fair trial from relitigating claims. Id. at 653.
PRIVITY DETERMINATIONS ON A CASE-BY-CASE BASIS
There is no general definition of privity that can be automatically applied in all res judicata cases; the circumstances of each case must be examined. Getty Oil v. Ins. Co. of N. Am., 845 S.W.2d 794, 800 (Tex. 1992). Privity exists if the parties share an identity of interest in the basic legal right that is the subject of the litigation. Caprock Inv. Corp. v. Montgomery, 321 S.W.3d 91, 96 (Tex. App.-Eastland 2010, pet. denied). Those in privity with a party may include persons who exert control over the action, persons whose interests are represented by the party, or successors in interest to the party. Getty Oil, 845 S.W.2d at 800-01.
SOURCE: TYLER COURT OF APPEALS - No. 12-12-00029-CV – 1/31/2013