Restraining Multiple Bites at the Class Certification Apple: May a Federal Court Enjoin a State Court from Relitigating a Class Certification Denial?

Abstract

This article previews the issues and arguments in the 2010-11 Supreme Court Term case, Smith v. Bayer Corp. In 2001, Keith Smith and Shirley Sperlazza filed a class action lawsuit against Bayer Corporation in West Virginia state court, alleging varying claims arising out of their use of the prescription drug Baycol. In 2008, the Federal District Court for Minnesota, overseeing the massive Baycol products multidistrict litigation, denied class certification under the federal class action Rule 23, to a proposed class of West Virginia consumers alleging economic-loss injury. Shortly after denial of the federal action, the Smith class moved for class certification in state court pursuant to the West Virginia class action rule.In response, the Bayer Corporation sought a permanent injunction enjoining the West Virginia class certification hearing, which the Minnesota federal district court granted. In January 2010, the United States Court of Appeals for the Eighth Circuit upheld this federal injunction of the West Virginia class certification hearing. This appeal involves the issue whether a federal court, consistent with the All Writs Act and the Anti-Injunction Act, could enjoin the West Virginia state court from determining whether to certify a class action after a federal court previously denied class certification in a virtually identical class action.The Court will address two major issues: (1) When a federal court in an MDL proceeding denies class certification of a statewide class action, may the court pursuant to the All Writs Act and the Anti-Injunction Act enjoin putative class members who were represented in the federal hearing from seeking class certification in state court for the same class action?, and (2) When a federal court in an MDL proceeding denies class certification of a statewide class action, is it impermissible for the federal court to issue an injunction restraining absent class member from seeking state class certification, where those absent class members were not afforded the due process protections required if certification had been granted?In deciding the Smith appeal, the Supreme Court will not forge any new ground in interpreting the Anti-Injunction Act or the All Writs Act. The appeal basically presents a fairly straightforward question concerning the appropriate exercise of the relitigation exception, in the context of dual federal-state class action practice. However, the Court’s Smith decision will have important implications for federal and state class action litigation.In the past twenty years, burgeoning of class action litigation in both federal and state court has given rise to problems relating to intersystem adjudication of complex litigation. There are no legal restrictions on litigants from filing parallel actions in both federal and state court, and the Anti-Injunction Act is a relatively weak mechanism for restraining parallel state proceedings.In the past two decades, federal courts have attempted to better manage duplicative class action litigation through increased use of the MDL procedures, which enable consolidation of all similar cases throughout the federal system, for coordinated pre-trial discovery and other proceedings. MDL procedure has proved to be a very effective mechanism for resolving massive litigation. In addition, Congress manifested an interest in channeling class action litigation into federal courts by enactment of CAFA, which created new federal jurisdiction for class actions and provided a vehicle for removal of class actions from state court into the federal system.Notwithstanding these developments, litigants still may pursue class action relief under state class action rules. The Smith appeal confronts the Court with the important question whether state litigants are free to seek a different class certification decision in a state court, once a federal court has determined class certification is not appropriate, and should be denied. As Bayer suggests, such a ruling would provide litigants with an incentive to keep filing state class actions until they find a judge who decides differently than the federal court. For policy reasons alone, Bayer contends this is an untenable conclusion.The Smith plaintiffs, on the other hand, suggest this case tests the very heart of federalism: the notion that state courts are free to determine issues according to their own interpretation of their laws and procedures, even where those laws and procedures are identical to federal rules.In the end, the Court’s opinion is likely to turn on a careful, nuanced analysis of the requirements of preclusion doctrine, with careful attention to the parties, issues, and nature of the class proceedings. We also may expect the Court to supply some further elucidation of what due process requires, in the class action context, to give preclusive effect to a class certification denial to nonparties to a prior litigation.