Topic: Class action certification and the Anti-Injunction Act.
Bayer tried to prohibit a West Virginia state court from certifying a class action by seeking an injunction in federal court. Bayer argued that an earlier denial of class certification by a different federal court barred the state court claims. The earlier case involved similar claims and the same defendant, but a different named plaintiff. The district court granted the injunction and the Court of Appeals for the Eighth Circuit affirmed. The U.S. Supreme Court reversed.
The Supreme Court held that the injunction violated the federal Anti-Injunction Act. The Act generally prohibits federal courts from using injunctions to stay state court proceedings. Under a narrow "re-litigation exception," federal courts may issue injunctions to prevent litigation in a state court of claims or issues previously decided by a federal court. The Court held here that an injunction based on the re-litigation exception must meet two conditions. First, the federal court must have decided the same issue as that presented in the state court case. Second, the plaintiff in the state court case must have been a party to the federal case or must fall within one of a few exceptions to the general rule against binding nonparties. In the case before it, the Court said that differences in the interpretation of state and federal procedural rules meant the state court action presented different issues than those before the federal court that first denied class certification. The Court also determined that the plaintiff in the state court case did not have enough of a connection to the federal court case to be bound by the federal court's decision. The Court opined that even though the plaintiff had been an unnamed member of the proposed class in the federal court case, the plaintiff could not be considered a "party" to the federal court case for preclusion purposes because the class was never certified and the plaintiff did not fall under any of the exceptions to the rule against binding nonparties.
- Narrow exception: The Court described injunctions granted by federal courts against state court proceedings under the re-litigation exception as "heavy artillery" that are proper only if "preclusion is clear beyond peradventure." Otherwise, determining whether a prior decision from the federal court has preclusive effect usually remains a question for the second (state) court to decide.
- Plaintiff benefits. Under the Court's ruling, plaintiffs' lawyers denied class certification are able to keep trying for class certification by filing in a different court using a different named plaintiff or by filing somewhere that interprets the applicable class certification rule differently than the first court. Defendants in class action cases may find themselves in situations where they can lose but never win, because they must defeat multiple attempts at class certification while plaintiffs' attorneys need only succeed once to have a class action go forward.
- Buying peace. The Court acknowledged that its ruling may force defendants to choose between buying "litigation peace" by settling or facing multiple attempts at certifying the same class in different courts. But the Court said it would not solve the problem by binding nonparties to a judgment.
The Class Action Fairness Act of 2005 may provide a partial remedy to class action's re-litigation problem. This Act allows a defendant to remove any sizeable class action involving minimal diversity of citizenship to federal court, whereas Federal Rule 23 governs class certification. If another federal court has already denied certification of the same or a similar class, then a second federal court should reach the same result under principles of comity. But if the case cannot be removed, then the defendant's fate remains in the state court's hand because nothing precludes it from reaching its own decision on class certification.
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