Yesterday the National Law Journal published my column on the preclusive effect of decisions denying class certification. The article also addressed the Eleventh Circuit's recent punt on the preclusive effect of the phase one findings of the class action trial of the Engle case, which was decertified by the Florida Supreme Court.
Being a believer in recycling, I encourage you to read the column here.
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.
Monday, it was technical problems at the LexBlog network that prevented me from posting.
Yesterday, it was presenting at and attending ACI's Asbestos Litigation Conference in Philadelphia.
But today -- finally -- I get to share with you the California Supreme Court's opinion in Boeken v. Philip Morris USA, Inc., S162029, Slip op. (Cal. May 13, 2010), which presents a fascinating little question of whether a common law claim for loss of consortium is sufficiently like a statutory wrongful death claim to be barred by res judicata.
The facts in Boeken are simple enough. After smoking for 42 years, plaintiff's husband was diagnosed with lung cancer. He filed suit against the defendant in March 2000. In October 2000, plaintiff filed her own separate common law action against the defendant for loss of consortium. (Her husband was still alive at the time.) She alleged that as a result of his lung cancer, her husband was "unable to perform the necessary duties as a spouse" and she was "permanently deprived" of her husband's consortium, including "the loss of love, affection, society, companionship, sexual relations, and support." In February 2001, plaintiff voluntarily dismissed her suit with prejudice. There is no explanation in the record as to why. Her husband was still alive at the time.
After a jury trial, her husband was awarded $5,539,127 in compensatory damages and $3 billion in punitive damages. Plaintiff's husband died in January 2002, while the appeal was pending. The Court of Appeal reduced the punitive award to $50 million, but otherwise affirmed the judgment. And in March 2006, plaintiff received over $80 million in satisfaction of that judgment.
But while the appeal was pending (and after her husband had died), plaintiff had filed another action on behalf of herself. This second action was a statutory wrongful death action seeking compensation for the loss of the husband's companionship and affection. Plaintiff alleged that she had suffered "loss of love, companionship, comfort, affection, society, solace, and moral support."
The trial court held that plaintiff's second lawsuit was barred by the prior dismissal with prejudice of her first action. A divided panel of the Court of Appeal affirmed. In Boeken, a divided California Supreme Court affirmed: "The doctrine of res judicata prohibits a second suit between the same parties on the same cause of action. . . . We conclude that plaintiff's wrongful death action involves the same primary right and breach as her former loss of consortium claim, and that therefore the doctrine of res judicata bars plaintiff's wrongful death action." Slip op. at 1-2.
The California Supremes explained that when California became a state in 1850, the spouse of a person who was injured by a tort had no cause of action for loss of support, regardless of whether that person was wrongfully killed or merely non-fatally injured. In short, there was no loss of consortium at common law. In 1862, however, the Legislature passed a statute allowing spouses and close relatives to sue for pecuniary harm arising from a tort victim's death. That statutory right was later broadened to include "non-economic" harm, including loss of society and comfort. Slip. op. at 7.
But it wasn't until 1974 that the California Supreme Court changed the common law to provide a cause of action for "loss of consortium" for spouses of tort victims who were not fatally injured. As the court described it, wrongful death was a creature of statute, and loss of consortium was now a common law cause of action.
Res judicata has two aspects. It bars subsequent claims on the same cause of action, and, as "collateral estoppel," it operates as a conclusive adjudication of issue in the second action that were actually litigated and determined in the first action. Res judicata has three prerequisites: (1) the issue raised in the present action must be identical to the issue litigated in the prior proceeding, (2) the prior proceeding must have resulted in a final judgment on the merits, and (3) the party against whom the doctrine is asserted must have been a party in the prior proceeding (or in privity with one).
In determining whether prong one was met, the court invoked what it called the "primary rights" theory:
The cause of action is the right to obtain redress for a harm suffered, regardless of the specific remedy sought or the legal theory (common law or statutory) advanced. "[T]he 'cause of action' is based upon the harm suffered, as opposed to the particular theory asserted by the litigant. Even where there are multiple legal theories upon which recovery might be predicated, only one injury gives rise to only one claim for relief. 'Hence a judgment for the defendant is a bar to a subsequent action by the plaintiff based on the same injury to the same right, even though he presents a different legal ground for relief." Thus, under the primary rights theory, the determinative factor is the harm suffered.
Slip op at 10 (citations omitted).
The court determined that the primary right asserted by plaintiff was the right not to be wrongfully deprived of spousal companionship and affection, and the defendant's alleged corresponding duty was the duty not to wrongfully deprive her of such companionship and affection by inducing her husband to smoke cigarettes. Looking at the prior complaint -- which had alleged that she had been "permanently deprived" of her husband's companionship and affection -- and her present complaint, which effectively alleges the same thing, the court concluded that the present suit was barred by res judicata.
Plaintiff argued that she could not have obtained damages in her first action for post death loss of consortium, only loss of consortium up to the time of her husband's death. As such, she argued, the primary right asserted in her current wrongful death claim was different from that asserted in her first lawsuit. The court disagreed, holding that when a spouse sues for loss of consortium regarding a living spouse, they are able to pursue future damages that are reasonably certain to occur. And the measure of these anticipated damages takes into account the life expectancy of the spouse as well as the injured tort victim. So the damage award on a loss of consortium claim can reflect the anticipated loss of consortium through the life expectancy of the couple if the tort had not occurred. Slip op. at 13-14.
A rule limiting a loss of consortium claim to the lifetime of the injured spouse, and requiring a separate wrongful death claim for post-death loss of consortium, "would often lead, in the case of a life-curtailing injury, to multiple proceedings and the possibility of a double recovery or an inadequate recovery. Id. at 18.
Accordingly, the court held that plaintiff's prior dismissal with prejudice of her first action for loss of consortium barred her subsequent lawsuit for wrongful death.
Three justices dissented. First, they argued that a wrongful death claim includes many types of damages that a loss of consortium claim does not (including funeral expenses). Second, they argued that if loss of consortium were truly the same as wrongful death, then the triggering of the statute of limitations on a loss of consortium claim would trigger the statute of limitations on a wrongful death claim -- even where the injured spouse had not yet died. "But in fact it is indisputable that the statute of limitations on a wrongful death claim does not begin to run until the death of the spouse or other relative at the earliest, regardless of the timing of any predeath injuries." Dissent at 4.
Moreover, the dissenting justices disputed whether a voluntary dismissal with prejudice can qualify for res judicata treatment since the issues have not been "actually litigated" for collateral estoppel purposes. Dissent at 8. They argued that where there is a corresponding settlement agreement reflecting an intention to resolve certain issues with finality, res judicata can apply, but that without such an agreement, there can be no "actual litigation" and no finality.
The decision in Boeken highlights the importance of dismissals with prejudice. By studying the dissent, defense lawyers can identify ways in which to strengthen settlements and other agreements whereby litigants agree to drop claims with prejudice.
It's the question a defense lawyer seldom actually confronts head-on, but one that is always at the front of his or her mind: how can the judgment against my client in one case be used to bind it in other cases?
Or, for you law review types: will the findings of fact and conclusions of law in this case subject the client to non-mutual collateral estoppel in a subsequent case?
Where there are multiple lawsuits, there is always a risk that someone may take the defendant's loss in one case and try to bar the defendant from presenting evidence on the issue in the next case, arguing that what was already found by a court once should hold true in the later action. That is called "collateral estoppel" or, more simply, "issue preclusion." The fact that the plaintiff in the second action is different from the plaintiff in the first action means that it is "non-mutual." The plaintiffs are different, but the defendant remains the same.
Some people can make it sound awfully efficient and useful to have one court's judgment bind a defendant on certain issues in subsequent trials. But the fact remains that -- particularly in mass tort litigation, where there are hundreds or thousands of such claims -- prematurely binding a defendant to one particular outcome deprives us of the benefit of a robust number of trials to see how patterns of liability or non-liability may develop. It's the American way to allow juries in different states to hear evidence and apply their own law to the facts and reach a conclusion, rather than having one trial decide everything. And it can seem downright un-American to prematurely cut-off a defendant's right to present a defense and hold it to a single jury's determination of an issue.
Recently, the question of issue preclusion was presented to a federal court in Maine that was presiding over a multidistrict litigation involving cases alleging fraud and unjust enrichment against Philip Morris and Altria for their allegedly fraudulent promotion of "light" cigarettes as being safer than ordinary cigarettes. See In re: Light Cigarettes Marketing Sales Practices Litigation, MDL Docket No. 1-09-MD-2068 (D. Me. Mar. 5, 2010).
In 2006, a federal judge in the District of Columbia -- the Honorable Gladys Kessler -- had issued a mammoth final judgment in a civil RICO case that had been brought by the Department of Justice against the entire tobacco industry. See United States v. Philip Morris USA, Inc., 449 F. Supp. 2d 1 (D.D.C. 2006), aff'd in part and vacated in part, 566 F.3d 1095 (D.C. Cir. 2009), petition for cert. filed (Feb. 19, 2010). That landmark case had proceeded for more than 7 years. It was tried to the judge; there was no jury. Judge Kessler had issued some 4,088 separate factual findings, and found the industry liable for a variety of alleged schemes to defraud.
The plaintiffs in the MDL pending in Maine wanted to use more than a thousand of Judge Kessler's findings of fact to bind Philip Morris and its parent, Altria, in the subsequent civil class action cases brought by individual smokers under state consumer protection laws and for unjust enrichment. Chief Judge John A. Woodcock, Jr., who is presiding over the Light Cigarettes MDL, thus was confronted with whether to impose non-mutual collateral estoppel on the defendants.
There are four basic requirements for issue preclusion generally: (1) the issues in the earlier and later cases must be identical, (2) the issues must have been actually litigated in the prior action, (3) the prior judgment must be final, and (4) the issue must have been essential to the final judgment, not merely incidental or collateral to it.
Chief Judge Woodcock determined that there was no doubt that the issues plaintiffs sought preclusion on were actually litigated before Judge Kessler, so requirement 2 was definitely met. And her judgment was properly considered final, even though a certiorari petition is pending before the United States Supreme Court, so requirement 4 was met, too.
But Chief Judge Woodcock had many doubts about whether the identity of issues requirement was met. Many of Judge Kessler's findings referred to the "Defendants" and were not specific to Philip Morris or Altria. He reasoned that it would be unfair to hold those two companies liable for the collective wrongful acts of all tobacco companies. Moreover, the "light cigarette" scheme was only one of six that Judge Kessler had held the industry liable for in her opinion, and it was unclear how heavily if at all, her judgment relied on the specific actions of Philip Morris and Altria regarding light cigarettes.
In addition, the period of time relevant to Judge Kessler had been fifty years. In contrast, many of the suits pending in Maine had much shorter proposed class periods that began near the time of Judge Kessler's opinion. Thus, the overlap of time may not be identical.
Chief Judge Woodcock acknowledged that there were some findings -- particularly relating to Philip Morris's knowledge about the health risks of light cigarettes -- that might be identical. But Chief Judge Woodcock was concerned that "because of the small number of findings related to light cigarettes, the Court is not convinced that they were central to [Judge Kessler's] conclusion of light cigarette fraud on the part of the enterprise." Slip op. at 15.
Indeed, the court concluded that the sheer volume of the findings plaintiffs wanted to use -- 1,083 -- proved that they could not possibly have been central to Judge Kessler's holding. As the court explained: "Judge Kessler included the lengthy findings so that readers could 'fully appreciate how massive the case is against the Defendants,' not necessarily because the facts were critical to her conclusion." Slip op. at 14 (citation omitted).
Ultimately, Chief Judge Woodcock applied the Supreme Court's decision in Parklane Hosiery Co. v. Shore, 439 U.S. 329 (1979) to decide against giving Judge Kessler's findings issue-preclusive effect in the cases before him. In Parklane Hosiery, the Supreme Court had counseled that where issue preclusion is being used by someone who was not a party to the prior suit, certain public policy and fairness factors also must be considered. Slip op. at 3.
Weighing those factors, Chief Judge Woodcock noted that the defendants had been deprived of a jury trial before Judge Kessler, whereas they would be entitled to one in the actions pending before him. He also expressed the very practical concern about "the possibility for jury confusion and the lack of efficiency." Id. at 15. Indeed, given the sheer number of factual conclusions that plaintiffs wanted to use (more than 1,000), the court noted that they would likely confuse the jury without presenting some background and clarifying testimony -- but that would defeat the whole efficiency purpose being used to justify issue preclusion. Id. at n.17. Moreover, the Supreme Court recently has admonished that punitive damages may not be used to punish a defendant for injuries it inflicted on people other than the plaintiffs; but using findings of fact from a prior trial necessarily would run afoul of that rule and would require potentially confusing corrective instructions. Id. at 15-16. In addition, the court concluded, little efficiency would be achieved because individual plaintiffs still would need to prove that they relied on the defendants' alleged misrepresentations and that they were actually deceived. Id. at 16.
Interestingly, Chief Judge Woodcock did not seem to take a position on one of the defendants' arguments that I found most logical and compelling: namely, that applying issue preclusion would be unfair under Parklane Hosiery because the defendants routinely had won jury verdicts in cases involving light cigarettes, and thus Judge Kessler's findings did not stand uncontradicted and could not be given preclusive effect without arbitrarily favoring one judgment over another. Id. at 7-8.
Ultimately, Chief Judge Woodcock's order is the third one that has refused to give issue-preclusive effect to Judge Kessler's behemoth 2006 order. Its careful reasoning is instructive and should give any court faced with mass tort litigation pause before artificially depriving a defendant of its right to present evidence to contest a claim.
A recent decision from a federal district court in Massachusetts raises interesting issues regarding the effect of rulings in competing class actions. In Gintis v. Bouchard Transportation Co., 2009 WL 95661 (D. Mass. Jan. 15, 2009), a tugboat and barge had strayed off course while navigating a shipping canal. They collided with a reef, resulting in up to 98,000 gallons of oil being spilled into Buzzards Bay, contaminating real property all along the bay and requiring cleanup.
Buzzards Bay property owners had sued the defendants in both state and federal court in Massachusetts. The state court had declined to certify a class of propertyowners from across the bay, finding that the named representatives from the town of Mattapoisett could not adequately represent the interests of a baywide class. The state court ultimately did, however, certify a class of Mattapoisett residents.
In federal court, both the plaintiffs and defendants sought to use the state court decision offensively, urging that the order merited collateral estoppel effect. The defendants sought to hold plaintiffs to the state court's determination that a baywide class was not certifiable. The plaintiffs sought to hold defendants to the state court's determinations on the individual elements of Rule 23.
The court in Gintis rejected both assertions of collateral estoppel. The court acknowledged that the Seventh Circuit has held that a court's denial of certification can be conclusive against absent proposed class members. Id. at *2 (citing In re Bridgestone/Firestone, Inc. Tires Prods. Liab. Litig., 333 F.3d 763, 768 (7th Cir. 2003)). But that can only be the case where the absent class members were adequately represented by class counsel. Because the state court had held that the named plaintiffs there could not adequately represent other bay propertyowners, the state court's decision denying certification of a baywide class could not have collateral estoppel effect.
The court in Gintis similarly rejected the plaintiffs' attempt to give nonmutual offensive collateral estoppel effect to the state court's conclusions about predominance, superiority, and other elements of Rule 23. It reasoned that plaintiffs could not easily have joined the earlier state court action, and further it would be fundamentally unfair to apply collateral estsoppel to defendants because the state court's determinations on the elements of Rule 23 were made based on assumptions about a much smaller and manageable Mattapoisett-only class.
Having dispensed with the collateral estoppel arguments, the district court proceeded to analyze whether the proposed class of more than 1,000 property owners from around the bay should be certified. The plaintiffs argued that there were good grounds to certify the class for at least liability and causation determinations, leaving the calculation of damages to be determined subsequently on an individual basis.
The court ultimately held that the predominance and superiority requirements were not satisfied because determining liability and causation on the public nuisance theory would require the same kind of individualized inquiry that a damages determination would require:
[T]he proposed class members would have to show that there has been an "unreasonable interference with a right common to the general public" and some "special injury of a direct and substantial character." A showing of "unreasonable" interference and "special," "direct," and "substantial" injury would require an examination into the individual characteristics of the proposed class members' properties and the extent of contamination.
Id. at *5. In reaching this conclusion, the court relied heavily on the decision in Church v. General Electric Co., 138 F. Supp. 2d 169 (D. Mass. 2001), in which a court refused to certify a class to determine whether PCB contamination constituted public nuisance and trespass for riparian landowners.
Enter keywords:
