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Collateral estoppel should not be applied where to do so
would work a “manifest injustice”. See Grantham v. McGraw-Edison
Co., 444 F.2d 210, 217 (7th Cir. 1971); see also 18 Wright
et al., Fed. Prac. P., secs. 4424, 4426 (2002). The
determination of “‘whether or not application of collateral
estoppel is fair depends upon a case by case analysis,’ and * * *
courts should be sensitive to the ‘practical realities which
surround the parties’.” Chicago Truck Drivers v. Century Motor
Freight, Inc., 125 F.3d at 531 (quoting Butler v. Stover Bros.
Trucking Co. 546 F.2d 544, 551 (7th Cir. 1977)). A situation in
which the application of collateral estoppel produces an unjust
result is when the party sought to be precluded did not have an
adequate incentive to obtain a full and fair adjudication in the
initial action. See Ferrell v. Pierce, 785 F.2d 1372, 1384-1385
(7th Cir. 1985); see also Restatement, Judgments 2d, sec. 28(5)
(subsection (c)) (1980).
In Ferrell v. Pierce, supra, a District Court in a class
action interpreted a decree controlling HUD mortgage default
relief practices to require the use of a particular rule when
calculating the date of default in all pending and future cases;
no appeal was taken. In a subsequent contempt proceeding, the
same issue arose with respect to retroactive rather than future
application of the same rule. The Court of Appeals for the
Seventh Circuit ruled that issue preclusion did not foreclose
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