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Posts Tagged ‘claim preclusion’

Earlier today, the Supreme Court issued its third of four class action-related decisions for the October 2010 term.  In Smith v. Bayer Corp., No. 09-1205, the Court held that a federal court exceeded its authority when it issued an injunction preventing a state court from considering whether to certify a class on claims in which the federal court had previously denied class certification. 

Justice Kagan’s opinion involves a fairly straightforward academic analysis of the “re-litigation exception” to the federal Anti-injunction Act and principles of issue and claim preclusion: where a state court applies a different class certification standard than the standard applicable under FRCP 23, the issue decided in the federal action on class certification is not the same as the one to be decided in the state court proceeding.

However, the practical impact of the decision is that a plaintiffs’ lawyer who is unsuccessful in seeking class certification in federal court can try again in a state that applies a different class certification standard.  Of course, the successive class action is potentially subject to removal under the Class Action Fairness Act (CAFA), but if one of the exceptions to CAFA applies, such as the home state or local controversy exception, the Court’s decision paves the way for multiple bites at the class certification apple.

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As defense lawyers, our instincts tell us to take our shot at a dispositive ruling on the merits if it might allow us to avoid a class certification hearing.  We know that the material facts aren’t in dispute and that we should win on the law, if we can just get the judge to ignore the plaintiffs’ attorneys constant spin and obfuscation and focus on the real legal issues.  The named plaintiff has no case, and consequently, the class has no case either.  We hardly ever answer until our motion to dismiss is denied.  If the motion to dismiss doesn’t work (which is almost always because the judge is overwhelmed and doesn’t want to take a chance at possible reversal by dismissing the case too early) we look for the first opportunity to file a motion to strike, a motion for judgment on the pleadings, a motion for ruling as a matter of law, or if all else fails, a motion for summary judgment.

But contrary to those instincts, filing a summary judgment motion before certification proceedings in a class action can be a lose-lose proposition.  If the defendant loses the motion, there is a good chance that the court won’t look seriously at the issue in another pretrial motion filed after certification, when the facts are likely to be more fully developed.  On the other hand, if the defendant wins, the victory may be a hollow one because the judgment is not likely to be given any preclusive res judicata or collateral estoppel effect as to absent class members.  Thus, winning a pre-certification summary judgment does not guarantee an end to the exposure.  Any other member of the putative class can simply file a class action under the same legal theory in a new case.

Some may consider the mere suggestion heresy, but there are situations where a defense lawyer might even consider counseling a client to stipulate to class certification in order to get a final resolution on the merits of a claim that is binding on all potential plaintiffs.  

Of course, it’s a rare case where the potential reward of guaranteed claim or issue preclusion justifies the risk of a classwide adverse judgment.  Usually, winning a dispositive motion against the named plaintiff promises to mark the end of the litigation for all practical purposes, either because the ruling is likely to dissuade the same or other plaintiffs’ attorneys from spending the time and effort pursuing a similar theory of liability, because the plaintiff is one of very few individuals willing an able to serve as class representative, or because a subsequent class action would be time-barred (this raises the issue of piggybacking of successive class actions, which is a subject for another day).

But even if it is likely in many cases that the potential benefits of filing a dispositive motion before pre-certification will ultimately carry the day, it is always a good idea to first consider the preclusive effect–or lack thereof–of a pre-certification judgment.

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