Sunday, May 4, 2008

Ninth Circuit Opinion on Anti-Injunction Act

The Ninth Circuit issued an opinion last week on the All Writs Act exception to the Anti-Injunction Act. In Negrete v. Allianz Life Insurance Co. of North America, 2008 WL 1868993, the district court certified a nationwide RICO class a few months before other state and federal courts certified competing classes. Plaintiffs in a competing class initiated in the Minnesota District Court by the Minnesota Attorney General began mediation discussions with the condition that talks would include the possible settlement of other actions. Plaintiffs in the California district court requested that the court enjoin the negotiations.

"On March 19, 2007, the district court, without holding a hearing, issued an order nominally denying the application because it was "not authorized by the All Writs Act." How ever, the court went on to order:

Any discussions of a settlement that would affect any claims brought in this litigation, other than claims of an individual plaintiff or class member, must be conducted or authorized by plaintiffs' Co-Lead Counsel. Any proposed settlement that resolves, in whole or in part, the claims brought in this action shall first be subject to review and approval by the Court in this litigation."

The Ninth Circuit concluded that the quasi-injunction was inappropriate. Here’s an excerpt of its rationale:

Courts have held that the existence of advanced federal in personam litigation may, in some instances, permit an injunction in aid of jurisdiction. That is a fairly common theme. See In re Diet Drugs Prods. Liab. Litig., 282 F.3d 220, 239 (3d Cir.2002) (MDL class action where class provisionally certified and settlement preliminarily approved); Hanlon v. Chrysler Corp., 150 F.3d 1011, 1018, 1024-25 (9th Cir.1998) (class action settlement preliminarily approved and state court action would opt out a whole subclass); Winkler v. Eli Lilly & Co., 101 F.3d 1196, 1201-03 (7th Cir.1996) (MDL case where a state proceeding would overturn the effect of a district court discovery order); Battle v. Liberty Nat'l Life Ins. Co., 877 F.2d 877, 880-81 (11th Cir.1989) (class action case had reached judgment stage and state court litigation would interfere with administration of post-judgment proceedings); In re Baldwin-United Corp., 770 F.2d 328, 337-38 (2d Cir.1985) (MDL class action where class certified, settlement agreements reached, and only district court approval of those remained); Carlough v. Amchem Prods., Inc., 10 F.3d 189, 195, 202-04 (3d Cir.1993) (class action where settlement imminent); Swann v. Charlotte-Mecklenburg Bd. of Educ., 501 F.2d 383, 383-84 (4th Cir.1974) (per curiam) (class action case had reached judgment and state court litigation would interfere with carrying out the terms of that judgment). 

But in less advanced cases, courts have been more chary about issuing injunctions, as, indeed, they should have been. For example, the Third Circuit has confronted an MDL action case where a state court was entertaining a settlement of a class action covering a class of General Motors truck owners, who alleged defective placement of fuel tanks, at the same time as an MDL class action on the same subject was before the district court. In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 134 F.3d 133, 137 (3d Cir.1998). The court of appeals pointed out that no settlement had yet been approved by the MDL court, no provisional settlement was in hand, and no conditional class certification was extant. Id. at 144-45. Therefore, the state court proceeding was not the kind of interference that could justify an injunction. The Second Circuit reached the same result in a similar, but more advanced, piece of litigation. There the district court was handling an MDL securities class action arising out of the collapse of WorldCom. See Ret. Sys., 386 F.3d at 421. The district court enjoined class action proceedings in an Alabama court arising out of the same collapse. Id. at 423. That case had been moving toward trial, and the district court enjoined it from proceeding until after there was a trial in the federal class action. Id. No class settlement in the MDL case was imminent, but the injunction was issued on the basis that district court trial dates should be protected. Id. at 428-29. The court of appeals declared that the district court"has no interest-no interest that can be vindicated by the exercise of the federal injunction power-in being the first court to hold a trial on the merits." Id. at 429. It, therefore, overturned the injunction. Id. at 431; see also Zurich Am. Ins. Co. v. Superior Court, 326 F.3d 816, 826 (7th Cir.2003) (reversing grant of injunction where proceedings insufficiently advanced).

Here, none of the considerations that have induced courts to issue injunctions despite the strictures of the Anti-Injunction Act was present. This was not an MDL case; discovery was not complete; no class settlement was imminent, in fact, as far as the record shows no serious settlement progress had been made; and, finally, there was no evidence of collusive procedures, reverse auction or otherwise, even assuming that the existence of those would justify an injunction of state proceedings.

ECB

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