In Q International Courier v. Smoak, the Fourth Circuit in an opinion by Judge Shedd, joined by Judges Niemeyer and Williams, concluded that the trial court erred in applying the federal law of res judicata to determine the preclusive effects of the judgment in an earlier federal court case for which the court's subject matter jurisdiction was based on diversity.
Concluding that the Virginia law of res judicata applies, the Court noted in remanding the case that "neither party has argued that Virginia also has a specific res judicata rule for cases — like the instant one — in which the first action was litigated in federal district court. In such a circumstance, the initial question under Virginia law is whether the claims filed in the second action would have been considered compulsory counterclaims in the first action under Federal Rule of Civil Procedure 13(a)."
The Court cited Nottingham v. Weld, 377 S.E.2d 621 (Va. 1989), which the Virginia Supreme Court also cited, when it observed that: "The prior federal court judgment is accorded the preclusive effect in subsequent state litigation that the federal courts would have attached thereto." Glasco v. Ballard, 249 Va. 61, 64, 452 S.E.2d 854, 856 (1995). So, what exactly is the difference between the federal law of res judicata and the Virginia law of res judicata, if Virginia law would give the federal judgment the same effect as the federal courts would?