The U.S. Supreme Court kept the world waiting for its ruling in Dukes v. Wal-Mart Thursday, but the Court did issue an interesting opinion in Smith v. Bayer to tide us class action buffs over until the next round of rulings on Monday.
The Smith opinion confronts the question of when a federal court has the power to enjoin a parallel state-court proceeding. And given the number of times OTC has written the words “parallel state court proceeding” in just the last six weeks, that’s an important question. The Court’s unanimous opinion, written by Justice Elena Kagan, pays great deference to state courts, cautioning federal judges not to step on the toes of their state-court counterparts.
The case dates back to the Baycol litigation, in which plaintiffs who took Bayer’s cholesterol-lowering drug, which was recalled by the Food and Drug Administration in 2001, claimed they’d suffered injuries ranging from a fatal muscle-deteriorating condition to a host of less-specific problems. Two Baycol users in West Virginia filed putative class actions against Bayer based on West Virginia consumer protection laws against selling defective products. Bayer removed George McCollins’s case to federal court, where it became part of the Baycol multidistrict litigation. The other suit, which became known as the Smith case, named West Virginia defendants, so it stayed in state court.
McCollins’s case came up for class certification first. In 2008, Minnesota federal district court chief judge Michael Davis, who was presiding over the Baycol MDL, refused to certify a class of West Virginia Baycol purchasers, finding that individual issues of actual injury predominated over class issues. With the Smith state-court class certification looming, Bayer then asked Judge Davis to enjoin the Smith proceeding. Bayer’s lawyers at Bartlit Beck Herman Palenchar & Scott argued that the state-court class certification hearing would simply be a relitigation of the issues Judge Davis had already decided, so the case fell under an exception to the Anti-Injunction Act’s prohibition against federal court interference in state court cases.
Judge Davis agreed, and the U.S. Court of Appeals for the Eighth Circuit affirmed him. (Scotusblog has the Eighth Circuit opinion and the Supreme Court briefs.) Smith’s lawyers at The Masters Firm in West Virginia then asked the Supreme Court to take the case.
Justice Kagan’s opinion, a notably lively and lucid discussion of what could be a dry procedural issue, concludes that Judge Davis erred twice in enjoining the Smith certification hearing. First, the Court found, the federal judge should not have accepted Bayer’s argument that the state court class certification would address the exact same issues as the federal case. “The district court ruled that the proposed class did not meet the requirements of federal Rule 23,” Justice Kagan wrote. “But the state court was poised to consider whether the proposed class satisfied West Virginia Rule 23.” And West Virginia, the opinion says, “has gone some way toward resolving the matter before us by declaring its independence from federal courts’ interpretation of the federal rules—and particularly of Rule 23.”
But that wasn’t the only reason Judge Davis should not have enjoined the West Virginia class certification hearing, the Supreme Court found. Under the federal Anti-Injunction Act, a federal judge can only enjoin a state proceeding if the same party is litigating the same issue in both courts. Bayer argued that Smith (the state court Baycol plaintiff) was a party in the McCollins case because he would have been in the McCollins class if it had been certified. Justice Kagan rejected that reasoning.
“Bayer faces a conundrum,” she wrote. “If we know one thing about the McCollins suit, we know that it was not a class action. Indeed, the very ruling that Bayer argues ought to be given preclusive effect is the district court’s decision that a class could not properly be certified. So Bayer wants to bind Smith as a member of a class action (because it is only as such that a nonparty in Smith’s situation can be bound) to a determination that there could not be a class action.” (Justice Kagan didn’t put an exclamation point at the end of her sentence, but she might as well have.)
Bayer had warned that permitting parallel state and federal class actions to proceed would open a litigation black hole, in which plaintiffs could try to get a class certified in courts all over the country. Though the Supreme Court opinion calls that policy consideration Bayer’s “strongest argument,” the Justices found it wasn’t reason enough to rethink the Anti-Injunction Act. “Our legal system generally relies on principles of stare decisis and comity among courts to mitigate the sometimes substantial costs of similar litigation brought by different plaintiffs,” Justice Kagan wrote. “We have not thought that the right approach…lies in binding nonparties to a judgment.” Besides, the opinion notes, the Class Action Fairness Act addresses some of the state-court duplication concerns Bayer raises.
OTC left a message for Richard Monahan of the Masters firm, who argued at the Supreme Court for Smith, but didn’t hear back. Phil Beck of Bartlit Beck argued for Bayer; Sidley Austin was also on Bayer’s briefs. Beck and Carter Phillips of Sidley referred a request for comment to a Bayer spokeswoman who sent an e-mail statement: “Bayer is disappointed by today’s ruling,” it says. “Bayer will continue to defend this case, including on the issue of class certification, should it move forward at the state level.”
(Reporting by Alison Frankel)