Monday, November 8, 2010

Seventh Circuit's All Writs Act Opinion in Thorogood v. Sears, Roebuck and Co.

Last week, the Seventh Circuit issued an opinion concerning the All Writs Act in Thorogood v. Sears, Roebuck and Company (No. 10-2407).  Suit 1 involved plaintiff Thorogood, who sued in the state court of Illinois.  Sears, the defendant, removed to federal court, and the federal district judge, Judge Leinenweber, certified the class action.  Plaintiff alleged that Sears engaged in deceptive advertising because its Kenmore-brand clothes dryer was not made entirely of stainless steel; the front part of the drum is made of a ceramic-coated mild steel, which isn’t stainless steel.  Sears appealed Judge Leinenweber’s decision to certify the class and, on appeal, the Seventh Circuit decertified, calling the case “a notably weak candidate for class treatment.” (Thorogood Opinion at 5.)  In particular, the Seventh Circuit held that common issues didn’t predominate because it was inconceivable that class members had a shared understanding of the advertisments.  After decertification, Sears made a Rule 68 offer of judgment for $20,000 (even though the maximum damages Thorogood could recover under Tennessee law were $3,000).  When the plaintiff refused, Judge Leinenweber dismissed the case since the offer exceeded the amount in controversy and mooted the case.  Thorogood appealed and the Seventh Circuit affirmed the district court’s denial of attorneys’ fees and the dismissal of the suit. 

Thorogood’s counsel (Clinton Krislov) found another plaintiff (Murray) and filed another, similar putative class action suit against Sears in California state court, which Sears promptly removed and argued was barred by issue preclusion.  In particular, Sears argued that the issue of whether the class could be certified had already been litigated and determined in the Illinois action.  The district court judge in California, Judge Claudia Wilken, initially agreed.  Plaintiffs’ counsel then amended the complaint and, according to Judge Wilken, sufficiently differentiated it from the complaint in Thorogood “to avoid the application of collateral estoppel.”  (Murray v. Sears, Roebuck and Co., 2010 WL 3490214, at *4 (N.D. Cal. Sept. 3, 2010)).  

Sears returned to the court in the Northern District of Illinois and asked Judge Leinenweber to enjoin the federal court in California from proceeding under the All Writs Act, 28 U.S.C. 1651(a).  Judge Leinenweber, however, ruled that Sears could obtain adequate relief by pleading collateral estoppel in the California action.  In a harshly worded opinion by Judge Posner, the Seventh Circuit reversed and enjoined class members and class counsel from further pursuing similar class action suits.  Because the issue that was precluded was whether the action could be maintained as a class action, the ruling did not prevent class members from pursuing an individual suit.

The result in this case isn’t surprising given Judge Easterbrook’s statement in In re Bridgestone/Firestone:

[W]hen federal litigation is followed by many duplicative state suits, it is sensible to handle the preclusive issue once and for all in the original case, rather than put the parties and state judges through an unproductive exercise.  That these suits are multiplying suggests that some lawyers have adopted a strategy of filing in as many courts as necessary until a nationwide class comes into being and persists. (333 F.3d at 766)

Easterbrook’s statements here and Posner’s statements in Thorogood suggest that collateral estoppel doesn’t always do the trick.  Even though issue preclusion should be determined by looking to the law that governed the issue in the first lawsuit (here federal law since the issue in question is whether to certify a class under FRCP 23), courts can come to different conclusions as to whether the issue in question is in fact the “same issue” (as did Judge Wilken in Murray).

These tactics were used somewhat more successfully before CAFA when state court cases couldn’t be removed to federal courts and the states could apply their own versions of Rule 23, which were often more forgiving than the federal version.  When federal courts are faced with enjoining state courts, they’re restricted by the Anti-Injunction statute, which prohibits injunctions against state proceedings “except as expressly authorized by an Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.”  Historically, these exceptions have been narrowly construed.

Smith v. Bayer Corp., which is currently pending before the U.S. Supreme Court, might affect the scope of the Thorogood injunction, though it wouldn’t change the result that Murray’s case cannot proceed.  Smith v. Bayer Corp. deals with the more classic injunction scenario of whether Baycol plaintiffs can bring a class action in West Virginia state court after the federal judge in the MDL action denied class certification on similar issues.  In other words, Smith v. Bayer Corp. addresses whether a federal court can enjoin a state court, not whether a federal court can enjoin another federal court (the primary question in Thorogood).  As Posner indicates, Smith may change the scope of the Thorogood injunction, which currently prevents copycat suits in state and federal courts.

ECB

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