517 U.S. 793116 S.Ct. 1761135 L.Ed.2d 76
RICHARDS et al.v.JEFFERSON COUNTY, ALABAMA, et al.Certiorari to the Supreme Court of Alabama.
No. 95-386.
Supreme Court of the United States
Argued March 26, 1996
Decided June 10, 1996

Syllabus*
Petitioners, who are privately employed in Jefferson County, filed a  state-court class action claiming that the county's occupation tax  violates the Federal and Alabama Constitutions. In granting the county  partial summary judgment, the trial court found that petitioners' state  claims were barred by a prior adjudication of the tax in an action  brought by Birmingham's acting finance director and the city itself,  consolidated with a suit by three county taxpayers, see Bedingfield v.  Jefferson County, 527 So. 2d 1270, but that petitioners' federal claims  had not been decided in that case.  The county and respondent intervenor  argued on appeal that the federal claims were also barred. The State  Supreme Court agreed, concluding that res judicata applied because  petitioners were adequately represented in the Bedingfield action.
Held:  Because petitioners received neither notice of, nor sufficient  representation in, the Bedingfield litigation, that adjudication, as a  matter of federal due process, may not bind them and thus cannot bar  them from challenging an allegedly unconstitutional deprivation of their  property.  Pp. 4-13.
(a) The traditional rule that an extreme application of state law res  judicata principles may be inconsistent with the Federal Constitution,  see Postal Telegraph Cable Co. v. Newport, 247 U. S. 464, 476, reflects  the general consensus that one is not bound by a judgment in litigation  to which he is not a party. Of course, there is an exception from these  principles when there is ``privity'' between a party to the second case  and a party who is bound by an earlier judgment.  Pp. 4-6.
(b) Because the Bedingfield parties gave petitioners no notice that a  suit was pending which would conclusively resolve their legal rights,  that proceeding would have a binding effect on them, as absent parties,  only if it were so devised and applied as to ensure that those present  were of the same class as those absent and that the litigation was so  conducted as to ensure the full and fair consideration of the common  issue. Hansberry v. Lee, 311 U. S. 32, 43.  Because the Bedingfield action plainly does not fit this description, there is no reason to  suppose that the court therein took care to protect petitioners'  interests in the manner suggested in Hansberry or that the Bedingfield  plaintiffs understood their suit to be on behalf of absent taxpayers.  Those plaintiffs did not provide representation sufficient to make up  for the fact that petitioners neither participated in, nor had the  opportunity to participate in, the earlier action.  Pp. 6-10.
(c) This court mat assume that if petitioners had relied on their taxpayer status to complain about an alleged misuse of public funds or  about other public action having only an indirect impact on their  interests, the State would have enjoyed wide latitude in limiting their  opportunity to make their case. However, because petitioners present a  federal constitutional challenge to the State's attempt to levy personal  funds, the Court is not persuaded that the nature of their actions  permits it to deviate from the traditional rule that an extreme application of state law res judicata principles violates the Federal  Constitution.  Pp. 10-12.
662 So. 2d 1127, reversed and remanded.
Stevens, J., delivered the opinion for a unanimous Court.
Justice Stevens delivered the opinion of the Court.


1
In Hansberry v. Lee, 311 U. S. 32, 37 (1940), we held that it would violate the Due Process Clause of the Fourteenth Amendment to bind  litigants to a judgment rendered in an earlier litigation to which they  were not parties and in which they were not adequately represented.  The  decision of the Supreme Court of Alabama that we review today presents  us with the same basic question in a somewhat different context.

I.

2
Jason Richards and Fannie Hill (petitioners) are privately employed in Jefferson County, Alabama.  In 1991 they filed a complaint  in the Federal District Court challenging the validity of the occupation  tax imposed by Jefferson County Ordinance 1120, which had been adopted  in 1987.  That action was dismissed as barred by the Tax Injunction Act,  28 U. S. C. Section(s) 1341.1 They then commenced this action in the  Circuit Court of Jefferson County.


3
Petitioners represent a class of all nonfederal employees subject to the county's tax.2  Petitioners alleged that the tax, which contains a lengthy list of exemptions, violates the Due Process  and Equal Protection Clauses of the Fourteenth Amendment and similar  provisions of the Alabama Constitution.  Because $10 million of the  annual proceeds from the county tax have been pledged to the  Birmingham-Jefferson Civic Center for a period of 20 years, the court  permitted the Center to intervene and support Jefferson County's defense  of its tax.


4
The county moved for summary judgment on the ground that petitioners' claims were barred by a prior adjudication of the tax in an  earlier action brought by the acting director of finance for the city of  Birmingham and the city itself.  That earlier action had been  consolidated for trial with a separate suit brought by three county  taxpayers, and the Supreme Court of Alabama upheld the tax in the  resulting appeal. See Bedingfield v. Jefferson County, 527 So. 2d 1270   (1988).  After examining the course of this prior litigation, the trial  court granted the county's motion for summary judgment as to the state constitutional claims, but refused to do so as to the federal claims  because they had not been decided by either the trial court or the  Alabama Supreme Court in Bedingfield.


5
On appeal, the county argued that the federal claims as well as  the state claims were barred by the adjudication in Bedingfield.  The  Alabama Supreme Court agreed.  The majority opinion noted that in  Alabama, as in most States, a prior judgment on the merits rendered by a  court of competent jurisdiction precludes the relitigation of a claim if  there is a "substantial identity of the parties" and if the "same cause  of action" is presented in both suits.  662 So. 2d 1127, 1128 (1995). Moreover, the court explained, the prior judgment is generally "`res  judicata not only as to all matters litigated and decided by it, but as  to all relevant issues which could have been but were not raised and  litigated in the suit.'"  Ibid. (quoting Heiser v. Woodruff, 327 U. S.  726, 735 (1946)).


6
The Alabama Supreme Court concluded that even though the opinion  in Bedingfield did not mention any federal issue, the judgment in that  case met these requirements.  The court gave three reasons for this  conclusion: (1) the complaints in the earlier case had alleged that the  county tax violated the Equal Protection Clause of the Fourteenth  Amendment and an equal protection issue had been argued in the appellate  briefs, 662 So. 2d, at 1129; (2) the taxpayers in Bedingfield adequately represented petitioners because their respective interests were "essentially identical," 662 So. 2d, at 1130; and (3) in pledging tax  revenues and issuing bonds in 1989, the county and the intervenor "could  have relied on Bedingfield as authoritatively establishing that the  county occupational tax was not unconstitutional for the reasons  asserted by the Bedingfield plaintiffs."  662 So. 2d, at 1130.


7
Justice Maddox dissented.  He agreed with the trial judge that  no federal constitutional claim had been adjudicated in Bedingfield.  662 So. 2d, at 1130-1131.  Moreover, he concluded that the mere fact  that the theory advanced by the petitioners in this case could have been  asserted in Bedingfield constituted an insufficient reason for barring  this action.  662 So. 2d, at 1131-1132.


8
We now conclude that the State Supreme Court's holding that petitioners are bound by the adjudication in Bedingfield deprived them  of the due process of law guaranteed by the Fourteenth Amendment.3

II.

9
State courts are generally free to develop their own rules for  protecting against the relitigation of common issues or the piecemeal  resolution of disputes.  Postal Telegraph Cable Co. v. Newport, 247 U.  S. 464, 475 (1918).  We have long held, however, that extreme  applications of the doctrine of res judicata may be inconsistent with a  federal right that is "fundamental in character."  Id., at 476.4


10
The limits on a state court's power to develop estoppel rules reflect the general consensus "`in Anglo-American jurisprudence that one  is not bound by a judgment in personam in a litigation in which he is  not designated as a party or to which he has not been made a party by  service of process.'  Hansberry v. Lee, 311 U. S. 32, 40 (1940). . . .  This rule is part of our `deep-rooted historic tradition that everyone  should have his own day in court.'  18 C. Wright, A. Miller, & E.  Cooper, Federal Practice and Procedure Section(s) 4449, p. 417 (1981)."  Martin v. Wilks, 490 U. S. 755, 761-762 (1989).  As a consequence, "[a]  judgment or decree among parties to a lawsuit resolves issues as among them, but it does not conclude the rights of strangers to those proceedings." Id., at 762; Blonder-Tongue Laboratories, Inc. v. University of Ill. Foundation, 402 U. S. 313, 329 (1971).


11
Of course, these principles do not always require one to have been a party to a judgment in order to be bound by it.  Most notably,  there is an exception when it can be said that there is "privity"  between a party to the second case and a party who is bound by an  earlier judgment.  For example, a judgment that is binding on a guardian  or trustee may also bind the ward or the beneficiaries of a trust.  Moreover, although there are clearly constitutional limits on the  "privity" exception, the term "privity" is now used to describe various  relationships between litigants that would not have come within the  traditional definition of that term.  See generally Restatement (Second)  of Judgments, ch. 4 (1980) (Parties and Other Persons Affected by Judgments).

In addition, as we explained in Wilks:

12
We have recognized an exception to the general rule when, in certain limited circumstances, a person, although not a party, has his  interests adequately represented by someone with the same interests who  is a party.  See Hansberry v. Lee, 311 U. S. 32, 41-42 (1940) (`class'  or `representative' suits); Fed. Rule Civ. Proc. 23 (same); Montana v.  United States, 440 U. S. 147, 154-155 (1979) (control of litigation on  behalf of one of the parties in the litigation).  Additionally, where a  special remedial scheme exists expressly foreclosing successive  litigation by nonlitigants, as for example in bankruptcy or probate,  legal proceedings may terminate pre-existing rights if the scheme is  otherwise consistent with due process. See NLRB v. Bildisco & Bildisco,  465 U. S. 513, 529-530, n. 10 (1984) (`[P]roof of claim must be  presented to the Bankruptcy Court . . . or be lost'); Tulsa Professional  Collection Services, Inc. v. Pope, 485 U. S. 478 (1988) (nonclaim  statute terminating unsubmitted claims against the estate)."  490 U. S.,  at 762, n. 2.


13
Here, the Alabama Supreme Court concluded that res judicata applied because petitioners were adequately represented in the Bedingfield action.  662 So. 2d, at 1130.  We now consider the propriety  of that determination.

III.

14
We begin by noting that the parties to the Bedingfield case failed to provide petitioners with any notice that a suit was pending  which would conclusively resolve their legal rights. That failure is  troubling because, as we explained in Mullane v. Central Hanover Bank &  Trust Co., 339 U. S. 306 (1950), the right to be heard ensured by the  guarantee of due process "has little reality or worth unless one is  informed that the matter is pending and can choose for himself whether  to appear or default, acquiesce or contest."  Id., at 314; Phillips  Petroleum Co. v. Shutts, 472 U. S. 797, 812 (1985); Schroeder v. City of  New York, 371 U. S. 208, 212-213 (1962).  Nevertheless, respondents ask  us to excuse the lack of notice on the ground that petitioners, as the  Alabama Supreme Court concluded, were adequately represented in  Bedingfield.5


15
Our answer is informed by our decision in Hansberry v. Lee, 311  U. S., at 40-41.  There, certain property owners brought suit to enforce  a restrictive covenant that purported to forbid the sale or lease of any  property within a defined area to "any person of the colored race." Id.,  at 37-38.  By its terms the covenant was not effective unless signed by  the owners of 95 per cent of frontage in the area.  At trial, the  defendants proved that the signers of the covenant owned only about 54  percent of the frontage.  Nevertheless, the trial court held that the covenant was enforceable because the issue had been resolved in a prior  suit in which the parties had stipulated that the owners of 95 percent  had signed.  Id., at 38 (referring to Burke v. Kleiman, 277 Ill. App.  519 (1934)).


16
Despite the fact that the stipulation was untrue, the Illinois  Supreme Court held that the second action was barred by res judicata.  See Lee v. Hansberry, 372 Ill. 369, 24 N. E. 2d 37 (1939).  Because the  plaintiff in the earlier case had alleged that she was proceeding "on  behalf of herself and on behalf of all other property owners in the  district," id., at 372, 24 N. E. 2d, at 39, the Illinois Supreme Court  concluded that all members of that "class," including the defendants  challenging the stipulation in the present action, were bound by the  decree.  We reversed.


17
We recognized the "familiar doctrine . . . that members of a class not present as parties to the litigation may be bound by the judgment where they are in fact adequately represented by parties who  are present, or . . . the relationship between the parties present and  those who are absent is such as legally to entitle the former to stand  in judgment for the latter."  Hansberry, 311 U. S., at 42-43.  We  concluded, however, that because the interests of those class members  who had been a party to the prior litigation were in conflict with the  absent members who were the defendants in the subsequent action, the  doctrine of representation of absent parties in a class suit could not support the decree.


18
Even assuming that our opinion in Hansberry may be read to leave  open the possibility that in some class suits adequate representation  might cure a lack of notice, but cf., id., at 40; Eisen v. Carlisle &  Jacquelin, 417 U. S. 156, 177 (1974); Mullane v. Central Hanover Bank &  Trust Co., 339 U. S., at 319, it may not be read to permit the  application of res judicata here.  Our opinion explained that a prior  proceeding, to have binding effect on absent parties, would at least  have to be "so devised and applied as to insure that those present are  of the same class as those absent and that the litigation is so conducted as to insure the full and fair consideration of the common  issue."  311 U. S., at 43; cf. Phillips Petroleum Co. v. Shutts, 472 U.  S., at 811-812.  It is plain that the Bedingfield action, like the prior  proceeding in Hansberry itself, does not fit such a description.


19
The Alabama Supreme Court concluded that the "taxpayers in the  Bedingfield action adequately represented the interests of the taxpayers  here," 662 So. 2d., at 1130 (emphasis added), but the three county  taxpayers who were parties in Bedingfield did not sue on behalf of a  class; their pleadings did not purport to assert any claim against or on  behalf of any nonparties; and the judgment they received did not purport  to bind any county taxpayers who were nonparties.  That the acting  director of finance for the city of Birmingham also sued in his capacity  as both an individual taxpayer and a public official does not change the  analysis.  Even if we were to assume, as the Alabama Supreme Court did  not, that by suing in his official capacity, the finance director  intended to represent the pecuniary interests of all city taxpayers, and  not simply the corporate interests of the city itself, he did not  purport to represent the pecuniary interests of county taxpayers like  petitioners.6  As a result, there is no reason to suppose that the  Bedingfield court took care to protect the interests of petitioners in  the manner suggested in Hansberry.  Nor is there any reason to suppose  that the individual taxpayers in Bedingfield understood their suit to be  on behalf of absent county taxpayers.  Thus, to contend that the  plaintiffs in Bedingfield somehow represented petitioners, let alone  represented them in a constitutionally adequate manner, would be "to  attribute to them a power that it cannot be said that they had assumed  to exercise."  Hansberry, 311 U. S.,  at 46.


20
Because petitioners and the Bedingfield litigants are best described as mere "strangers" to one another, Martin v. Wilks, 490 U.  S., at 762, we are unable to conclude that the Bedingfield plaintiffs  provided representation sufficient to make up for the fact that  petitioners neither participated in, see Montana v. United States, 440  U. S. 147, 154 (1979), nor had the opportunity to participate in, the  Bedingfield action. Accordingly, due process prevents the former from  being bound by the latter's judgment.

IV.

21
Respondents contend that, even if petitioners did not receive the kind of opportunity to make their case in court that due process  would ordinarily ensure, the character of their action renders the usual  constitutional protections inapplicable.  They contend that invalidation  of the occupation tax would have disastrous consequences on the county,  which has made substantial commitments of tax revenues based on its  understanding that Bedingfield determined the constitutionality of the  tax. Respondents argue that in cases raising a public issue of this kind, the people may properly be regarded as the real party in interest  and thus that petitioners received all the process they were due in the  Bedingfield action.


22
Our answer requires us to distinguish between two types of actions brought by taxpayers.  In one category are cases in which the  taxpayer is using that status to entitle him to complain about an  alleged misuse of public funds, see, e.g., Massachusetts v. Mellon, 262  U. S. 447, 486-489 (1923), or about other public action that has only an  indirect impact on his interests, e.g., Stromberg v. Board of Ed. of  Bratenahl, 64 Ohio St. 2d 98, 413 N. E. 2d 1184 (1980), Tallassee v.  State ex rel. Brunson, 206 Ala. 169, 89 So. 514 (1921).  As to this  category of cases, we may assume that the States have wide latitude to establish procedures not only to limit the number of judicial proceedings that may be entertained but also to determine whether to  accord a taxpayer any standing at all.


23
Because the guarantee of due process is not a mere form, however, there obviously exists another category of taxpayer cases in  which the State may not deprive individual litigants of their own day in  court. By virtue of presenting a federal constitutional challenge to a  State's attempt to levy personal funds, petitioners clearly bring an  action of this latter type. Cf. ibid. (distinguishing between "public"  and "private" actions).  Indeed, we have previously struck down as a  violation of due process a state court's decision denying an individual taxpayer any practicable opportunity to contest a tax on federal constitutional grounds.  See Brinkerhoff-Faris Trust & Sav. Co. v. Hill,  281 U. S. 673 (1930).  There, we explained:


24
"We are not now concerned with the rights of the plaintiff on the merits, although it may be observed that the plaintiff's claim is  one arising under the Federal Constitution and, consequently, one on  which the opinion of the state court is not final . . . . Our present  concern is solely with the question whether the plaintiff has been  accorded due process in the primary sense,--whether it has had an  opportunity to present its case and be heard in its support. . . .  [W]hile it is for the state courts to determine the adjective as well as  the substantive law of the State, they must, in so doing, accord the  parties due process of law.  Whether acting through its judiciary or  through its legislature, a State may not deprive a person of all  existing remedies for the enforcement of a right, which the State has no power to destroy, unless there is, or was, afforded to him some real  opportunity to protect it."  Id., at 681-682.


25
In any event, the Alabama Supreme Court did not hold here that  petitioners' suit was of a kind that, under state law, could be brought  only on behalf of the public at large.  Cf. Corprew v. Tallapoosa  County, 241 Ala. 492, 3 So. 2d 53 (1941) (discussing state statutory quo  warranto proceedings).  To conclude that the suit may nevertheless be  barred by the prior action in Bedingfield would thus be to deprive  petitioners of their "chose in action," which we have held to be a  protected property interest in its own right.  See Logan v. Zimmerman  Brush Co., 455 U. S. 422, 429-430 (1982); Phillips Petroleum Co. v.  Shutts, 472 U. S., at 812 (relying on Mullane v. Central Hanover Bank &  Trust Co., 339 U. S. 306 (1950)); Hansberry v. Lee, 311 U. S., at 37.  Thus, we are not persuaded that the nature of petitioners' action  permits us to deviate from the traditional rule that an extreme  application of state-law res judicata principles violates the Federal  Constitution.


26
Of course, we are aware that governmental and private entities  have substantial interests in the prompt and determinative resolution of  challenges to important legislation. We do not agree with the Alabama  Supreme Court, however, that, given the amount of money at stake,  respondents were entitled to rely on the assumption that the Bedingfield  action "authoritatively establish[ed]" the constitutionality of the tax. 662 So. 2d, at 1130.  A state court's freedom to rely on prior precedent  in rejecting a litigant's claims does not afford it similar freedom to  bind a litigant to a prior judgment to which he was not a party.  That  general rule clearly applies when a taxpayer seeks a hearing to prevent  the State from subjecting him to a levy in violation of the Federal  Constitution.

V.

27
Because petitioners received neither notice of, nor sufficient  representation in, the Bedingfield litigation, that adjudication, as a  matter of federal due process, may not bind them and thus cannot bar  them from challenging an allegedly unconstitutional deprivation of their  property.  Accordingly, the judgment of the Alabama Supreme Court is  reversed, and the case is remanded to that court for further proceedings  not inconsistent with this opinion.


28
It is so ordered.



*
 The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience  of the reader.  See United States v. Detroit Lumber Co., 200 U. S. 321,  337.


1
 Richards v. Jefferson County, 789 F. Supp. 369 (ND Ala.), affirmance order, 983 F. 2d 237 (CA11 1992).


2
 They were joined in the action by George Dykes and Joan  Dykes, employees of the Federal Government who also work in the county. The Dykes represent a separate class of federal employees whose claims  are not before us.


3
 After granting the petition to consider both the equal protection challenge to the tax scheme, and the due process challenge to  the Alabama Supreme Court's conclusion that their claims were barred by  the doctrine of res judicata, we entered an order dismissing the writ to  the extent that it included the equal protection question and directing  the parties to address at oral argument only the question whether the  application of res judicata afforded petitioners due process.  516 U. S.  ___ (1996). Because petitioners raised their due process challenge to  the application of res judicata in their application for rehearing to  the Alabama Supreme Court, that federal issue has been preserved for our  review.  See PruneYard Shopping Center v. Robins, 447 U. S. 74, 85-87,  n. 9 (1980).


4
 "The doctrine of res judicata rests at bottom upon the  ground that the party to be affected, or some other with whom he is in privity, has litigated or had an opportunity to litigate the same matter  in a former action in a court of competent jurisdiction. Southern  Pacific R. R. Co. v. United States, 168 U. S. 1, 48; Greenleaf Ev.,  Section(s) 522-523.  The opportunity to be heard is an essential  requisite of due process of law in judicial proceedings.  Windsor v.  McVeigh, 93 U. S. 274, 277; Louisville & Nashville R. R. Co. v. Schmidt,  177 U. S. 230, 236; Simon v. Craft, 182 U. S. 427, 436.  And as a State  may not, consistently with the Fourteenth Amendment, enforce a judgment  against a party named in the proceedings without a hearing or an  opportunity to be heard (Pennoyer v. Neff, 95 U. S. 714, 733; Scott v.  McNeal, 154 U. S. 34, 46; Coe v. Armour Fertilizer Works, 237 U. S. 413, 423), so it cannot, without disregarding the requirement of due process,  give a conclusive effect to a prior judgment against one who is neither  a party nor in privity with a party therein."  247 U. S., at 476.


5
 Of course, mere notice may not suffice to preserve one's  right to be heard in a case such as the one before us.  The general rule is that "[t]he law does not impose upon any person absolutely entitled  to a hearing the burden of voluntary intervention in a suit to which he  is a stranger."  Chase Nat. Bank v. Norwalk, 291 U. S. 431, 441 (1934);  but cf. Penn-Central Merger and N & W Inclusion Cases, 389 U. S. 486,  505, n. 4 (1968) (noting that absent parties were invited to intervene  by the court).


6
 We need not decide here whether public officials are always constitutionally adequate representatives of all persons over whom they  have jurisdiction when, as here, the underlying right is personal in  nature.  Cf. Lockport v. Citizens for Community Action at Local Level,  Inc., 430 U. S. 259, 263, n. 7 (1977) (voting rights challenge by county  residents not barred by county's prior suit); 18 C. Wright, A. Miller, &  E. Cooper, Federal Practice and Procedure Section(s) 4458, p. 518   (1981); infra, at 10-12.


