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Posts Tagged ‘collateral estoppel’

Last week, I posted a short note about the Eighth Circuit’s decision in In re Baycol Products Litigation.  Here is a more in-depth synopsis, thanks to fellow Baker & Hostetler partner Joe Ezzi:

The Eighth Circuit Court of Appeals recently affirmed a district court order enjoining state court plaintiffs from pursuing a class action because the district court had already denied certification of an identical class in federal court.  In re Baycol Products Litig., ___ F.3d ___ (8th Cir. January 5, 2010).

A state court putative class action was filed by George McCollins in West Virginia in 2001.  Bayer removed the case and it became part of a multidistrict action consolidated before the district court in Minneapolis.  Class certification was denied in the McCollins MDL class action, with the district court making certain legal conclusions concerning economic loss requirements under West Virginia law related to predominance.  At the same time, a similar West Virginia state court class action was pending against Bayer, albeit with different putative class representatives.  Following the district court’s denial of class certification, Bayer moved the district court to enjoin the plaintiffs in the West Virginia state court action from pursuing a class action because, as absent putative class members of the McCollins lawsuit, they could not relitigate the previous federal court decision denying certification of a West Virginia economic loss class.  The district court granted Bayer’s request for an injunction under the All Writs Act. 

The Eighth Circuit, in affirming the district court order enjoining the West Virginia state court class action, found that the West Virginia state court plaintiffs sought “certification on the same legal basis of the same class already denied in this case.”  In re Baycol Products Litig., ___ F.3d ___ (8th Cir. January 5, 2010), slip op. at 6.  Thus, “in the context of MDL proceedings, certification in a state court of the same class under the same legal theories previously rejected by the federal district court presents an issue sufficiently identical to warrant preclusion under federal common law.”  Id. at 10.  Further, relying on the Seventh Circuit decision in In re Bridgestone/Firestone, 333 F.3d 763 (2003), the Eighth Circuit noted that the putative class representative in the federal action was in privity with the state court class representatives for purposes of collateral estoppel based on allegations of adequacy of representation and because both putative class representatives asserted the same claims.

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A colleague tipped me off today to a recent Eighth Circuit Court of Appeals decision upholding a Minnesota federal district court’s order enjoining class certification proceedings in a West Virginia state court, following the federal court’s earlier denial of class certification in an action filed against the same defendant.  Here’s a link to the slip opinion: In re Baycol Products Litigation, No. 09-1069 (8th Cir., Jan. 5 2010).  The decision is in accord with a 2003 Seventh Circuit decision, In re Bridgestone/Firestone, 333 F.3d 763, 767-68 (7th Cir. 2003), which also held that the relitigation exception to the federal Anti-Injunction Act “permitted an injunction barring relitigation in state court of a federal court’s denial of class certification.”  In re Baycol Prods. Lit., No. 09-1069, slip op. at 9 (citing In re Bridgestone/Firestone, 333 F.3d at 769).

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I commented recently on the fact that the well publicized “class-action” trial against the United States Department of Veteran’s Affairs was never actually certified as a class action.  Instead, the case is being pursued by two nonprofit veterans’ advocacy groups who are pursuing the case on behalf of their members based on a concept called associational standing.  The popular media often uses the misnomer “class action” to define a wide range of lawsuits in which one or a few litigants prosecute a case on behalf of a larger group of interested parties.  Here is a partial glossary of them, along with some other terms often associated with representative actions:

Class Actions – Class actions are brought by one or more class representatives on behalf of a larger group of similarly situated people or legal entities.  Rule 23, Federal Rules of Civil Procedure, and similar state rules of civil procedure, govern whether a case can proceed as a class action.  A case does not become a true class action until the judge certifies a class.  Before a class is certified, lawyers and courts often refer to the case as a putative class action.

Derivative Suits – These lawsuits are brought by shareholders of a corporation on behalf of the corporation to pursue the rights of the corporation that the corporation itself has failed to enforce.  Derivative suits are governed by Rule 23.1, Federal Rules of Civil Procedure and similar state court rules.  A lawyer considering a lawsuit for corporate wrongdoing may face a choice between filing the case as a class action or a derivative suit.  See this recent WSJ Law Blog article for a recent example.

Collective actions – Some statutes, notably the federal Age Discrimination and Employment Act (ADEA) and Fair Labor Standards Act (FLSA), allow a court to certify a collective action as opposed to a representative action.  The key difference between these collective actions and representative actions like class actions is that in a collective action, absent parties are asked whether they want to opt in to the lawsuit.  By contrast, in a class action, absent parties are bound by the result of the litigation unless they opt out of the case after getting notice.  Many FLSA cases are brought as both collective actions and class actions.   The collective action procedure covers the FLSA claim, while the class action procedure governs any related state law claims.  Here’s a good article for more detail on the distinctions between collective actions and class actions.

Attorney general actions – State attorneys general and other governmental authorities (like the Federal Trade Commission) may, by statute, bring actions to enforce the rights of consumers and the public at large.  Here’s a link to the Colorado Attorney General’s consumer protection page.  See the Federal Trade Commission website for examples of consumer actions being pursued by the FTC.

Parens patriae actions – Parens patriae actions are a species of attorney general actions in which the government brings claims to recover monetary losses on behalf of its citizens.  In these actions, the government stands in the shoes of individual citizens and prosecutes the action to recover money for their benefit.  Here’s a link to a paper addressing parens patriae actions.

Private attorney general actions – Some statutes allow any person to bring an action to protect the rights of the public.  Until recently, an example of a statute allowing this type of action was the California Unfair Competition Law, Business & Professions Code Section 17200, which allowed a case to be brought on behalf of consumers injured by a defendant’s act of unfair competition, whether or not the plaintiff him or herself was harmed in any way.  This changed recently when the voter referendum Proposition 64 was passed, which requires a litigant to have lost money or other property as a result of the challenged practice, and must be able to satisfy the requirements for a class action in order to be allowed to pursue a UCL claim in a representative capacity.  A great resource for developments on the UCL is Kimberly Kralowec’s blog The UCL Practitioner.  Another example is California’s Labor Code Private Attorneys General Act of 2004 (PAGA), also called the Bounty Hunter Statute, which allows employees to pursue violations of the state labor code whether or not they had suffer injury, including the ability to pursue statutory penalties on behalf of the state and to share in any recovery of those penalties.  Here’s a link to an interesting California Court of Appeal decision addressing both PAGA and the UCL and the viability of an assignment of representative claims under those laws.

Qui tam actions – The federal False Claims Act is another example of a law that allows a private individual to pursue an action on behalf of the government.  An individual who has information about the misappropriate or theft of government funds may file an lawsuit under the Act known as a qui tam action.  The government has an opportunity to decide to take over the prosecution of the case, but if it declines, the person who filed the action may proceed and in the event of a recovery, he or she is entitled to a portion of the recovery.  Here is a link to an article summarizing the federal False Claims Act.

Associational actions – An association may, in some circumstances, bring an action on behalf of its members.  See this previous entry regarding the recent trial against the VA for more discussion on the requirements for associational standing.

Mass actions – Many lawsuits that people commonly associate with the term “class action” are really mass actions.  Mass actions are cases that involve the joinder of many individual claims for discovery, resolution of certain legal issues, or other purposes.  Unlike class actions, however, each claim ultimately has to be brought by an individual plaintiff, who must have some involvement in the proceedings.  Examples include many products liability cases, like those involving alleged injuries caused by tobacco, asbestos, or pharmaceuticals, where a common set of acts form the basis of a the claim for liability but where the effects are too individualized to establish all of the requirements necessary to support a true class action.  They may also be cases involving claims that arise from a single catastrophic event, like an airplane crash, toxic leak, or oil spill.  A well-known example is the Exxon Valdez oil spill case.  When numerous mass actions against the same defendant or group of defendants are filed in the federal courts, the cases are often transferred to a single district court under rules promulgated by the United States Judicial Panel on Multidistrict Litigation (MDL)

Bellwether trials – This is not so much a type of lawsuit but rather a procedural device to assist in resolving cases involving similar claims.  A bellwether trial is a essentially a sample test case, where one claim or set of claims are tried first to establish a precedent for the rest.  Bellwether trials generally cannot be used to bind parties in one case to the results of another, but they can be a useful tool for providing information to assist attorneys with valuing similar cases for settlement purposes.  Here are some good entries discussing bellwether trials from the Drug and Device Blog and the Mass Tort Litigation Blog.

Aggregator actions – For lack of a better phrase, this novel procedural vehicle involves the assignment of various plaintiffs’ right to pursue a lawsuit to a single person or entity, called an aggregator.  This procedural device is at issue in a case now pending before the United States Supreme Court.  See this entry at SCOTUS Blog.

Virtual representation – This is a concept applied in the trusts and estates area.  Under the doctrine of virtual representation, the participation in a proceeding of one heir or trust beneficiary can sometimes be deemed to be sufficient to protect the interests of unborn, unascertainable, or minor beneficiaries who could not otherwise appear.  See page 20 of this comprehensive summary of the 2005 Uniform Trust Code.

Non-mutual offensive collateral estoppel – The doctrine of collateral estoppel, or issue preclusion, provides that a party can be prevented from relitigating certain issues that were previously resolved against it.  Ordinarily, the concept applies to issues that were previously litigated between the same parties, but is sometimes possible for a plaintiff to bind a defendant to an earlier ruling in a case in which the plaintiff was not a party, if the earlier case involved a plaintiff with similar interests, and if the defendant had the same incentives to defend the lawsuit.  This doctrine has been applied only in very limited situations.  For a good analysis, see this Ninth Circuit Court of Appeals opinion

Reverse Bifurcation – Is a controversial procedure used in the West Virginia courts in which the punitive damages phase of a mass tort case against a defendant is tried before the liability phase.  See previous entries here, here, and here.

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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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