What is the difference between res judicata and collateral estoppel?

• A. Res judicata bars claims that were never litigated in any court.
• B. Collateral estoppel allows re-litigation of previously decided issues.
• C. Res judicata bars claims that could have been raised in a final judgment; collateral estoppel prevents re-litigation of actually litigated issues in later cases.
• D. Collateral estoppel applies only to state courts.

Answer: (C)

The difference rests in what is barred: claims versus specific issues. Res judicata (claim preclusion) stops a party from bringing a new lawsuit on a claim that was already decided, or that could have been raised, in a prior final judgment. It means once a case ends with a final judgment on the merits, the entire claim attached to that transaction is closed in later suits, even if a fresh lawsuit might pose different facts.

Collateral estoppel (issue preclusion) works differently. It prevents relitigating a particular issue that was actually litigated and essential to the prior judgment, in a later case. So after a final judgment, the specific contested issue can’t be re-decided in another case involving the same parties (or their successors), even if the other claims are different.

That distinction is captured by the statement that res judicata bars claims that could have been raised in a final judgment, while collateral estoppel prevents re-litigation of actually litigated issues in later cases. The other choices misstate the scope or application: res judicata isn’t about claims that were never litigated, collateral estoppel isn’t a permit to re-litigate, and collateral estoppel isn’t confined only to state courts.