California Class Action Is Barred by the Collateral Estoppel Effect of the Denial of Certification of an Identical Nationwide Class Action
While a number of bloggers have been pondering this week the Eleventh Circuit's decision on the collateral estoppel (or issue preclusive) effect of the jury's findings in the Engle tobacco case years ago, I have been enjoying another collateral estoppel decision: Murray v. Sears, Roebuck & Co., No. 09-05744 CW, Slip op. (N.D. Cal. July 21, 2010).
In Murray, plaintiff sought to represent a class of California purchasers of Kenmore clothes dryers that allegedly had been deceptively marketed to lead people to believe that the drums were 100% stainless steel, when in fact they were not.
The same lawyer had represented another plaintiff asserting the same claim in a putative nationwide class action. In that action, which twice went to the Seventh Circuit Court of Appeals, the Seventh Circuit held that there could be no class action, finding that there were no common issues of fact or law. See Thorogood v. Sears, Roebuck & Co., 547 F.3d 742, 747 (7th Cir. 2008).
Plaintiffs' counsel then retreated to California, filing the Murray action. The defendant moved in the Northern District of Illinois for an injunction against the Murray action, which was denied. That ruling is presently on appeal to the Seventh Circuit. But the defendant also moved before the Murray court either to stay discovery or strike the class allegations, citing the collateral estoppel effect of the Thorogood judgment.
The court in Murray granted the defendant's motion to strike class allegations. Plaintiff Murray argued that he should not be bound because he was not a named plaintiff in Thorogood. But the court noted that the Thorogood court had held that the plaintiff there met the adequacy of representation requirement, and the lawyers were the same in the two actions. This made plaintiff's conduct appear to be an example of "'deliberate maneuvering to avoid the effects of' Thorogood. Slip op. at 10 (citation omitted). Accordingly, the court found sufficient identity of parties to apply collateral estoppel.
Moreover, there was no question that the judgment in Thorogood was a final judgment on the merits that could be given collateral estoppel effect. The case had twice gone to the Seventh Circuit and plaintiffs even pursued rehearing en banc and certiorari. The judgment on the issues there was as final as it could get.
Plaintiff Murray also argued that the issues were not sufficiently identical to apply collateral estoppel effect to the Thorogood judgment. Primarily, he relied on the fact that Thorogood was a putative nationwide class involving the application of many states' laws, whereas the Murray action involved only the application of California law, which the plaintiff said required only an objective look at what the meaning of the marketing would be to an average consumer.
The district court rejected plaintiff's argument. First, it set out the four factors that aid in evaluating the identity of issues for collateral estoppel:
(1) is there a substantial overlap between the evidence or argument to be advanced in the second proceeding and that advanced in the first? (2) does the new evidence or argument involve the application of the same rule of law as that involved in the prior proceeding? (3) could pretrial preparation and discovery related to the matter presented in the first action reasonably be expected to have embraced the matter sought to be presented in the second? and (4) how closely related are the claims involved in the two proceedings?
Slip op. at 6 (quoting Resolution Trust Corp. v. Keating, 186 F.3d 1110, 1116 (9th Cir. 1999).
Using these factors as a guide, the court looked to the Thorogood opinions, which described that plaintiff's allegations as being that labeling a dryer drum as "stainless steel" caused buyers to assume it was 100% stainless steel and thus allayed their fear that the drum might rust and cause rust stains to get on their clothes. The Thorogood court had observed that rust getting on clothes is not a common problem with dryers, and thus the "assumption" that plaintiff was attributing to all class members was unlikely to be shared by very many (if any) class members at all. Slip op. at 7. Indeed, the Seventh Circuit had concluded that plaintiff's theory was "idiosyncratic" and that evaluation of each class member's claims thus would require individual hearings. Id. Indeed, the Seventh Circuit had concluded that the "deal breaker" was "the absence of any reason to believe that there is a single understanding of the significance of labeling or advertising clothes dryers as containing a 'stainless steel drum.'" Id. (quoting Thorogood).
Plaintiff Murray's theory was exactly the same; he just argued that because it would have to be adjudicated under only California law, his claim was somehow different. The court held that it was not different, and that the same idiosyncratic nature of plaintiff's claim that made class certification improper in Thorogood applied here as well, making collateral estoppel appropriate.
The Murray decision is a good example of courts taking a skeptical eye to lawyers who forum shop the same claims around the country to avoid a prior denial of class certification. Where the facts -- and not just the choice of law problems -- previously made the class uncertifiable, plaintiffs should not be allowed to escape an adverse decision merely by pleading a single, statewide class.
