I previously posted on Wal-Mart Stores, Inc. v. Dukes. Another pending Supreme Court case that could affect insurance class actions is Smith v. Bayer Corp., No. 09-1205 (docket).
Smith involves the scope of a federal court’s power to enjoin members of a proposed (not certified) class from continuing to seek class certification on the same issues in state court after a federal court has denied class certification. The case involves a multidistrict litigation concerning Baycol, a cholesterol-reducing drug that was withdrawn from the market by Bayer. The federal judge denied class certification, and shortly thereafter a plaintiff in another case filed a motion for class certification in a West Virginia state court. The federal judge enjoined the plaintiff in the West Virginia state court case from continuing to pursue class certification. The Eighth Circuit upheld the injunction, and the Supreme Court granted certiorari. The Class Action Countermeasures Blog set out some highlights from the oral argument.
The same tactic used by the plaintiffs’ attorneys in Smith happens frequently in insurance class actions – the same insurer is sued on the same issue in various jurisdictions, sometimes by the same plaintiffs’ lawyers, and in some instances they lose many times but keep trying to find a judge somewhere who will certify a class.
If the Court allows these types of injunctions, one unique issue insurers will face is that insurance policies are issued by individual underwriting companies that are part of a family of insurers. An issue will arise as to whether a denial of class certification against one company can bar another class action on the same issue brought against a different entity that is part of the same corporate family.
Based on the transcript of the oral argument in the Supreme Court, my guess (it is only a guess) is that the Court will allow these types of injunctions to be issued but may narrow the circumstances under which such injunctions are appropriate.
Justice Ginsburg expressed a concern about a plaintiffs’ attorney being able to keep trying until they find a judge who will certify a class:
You pick up a different plaintiff, and you go to a different forum. How – and I guess your answer is that you could go on and on and on until – until maybe you find a judge who will certify this class. (Transcript, at 17.)
In response to a question from Justice Kagan, plaintiffs’ counsel conceded, that the Class Action Fairness Act was intended to prevent this type of forum-shopping:
JUSTICE KAGAN: When – when Congress enacted CAFA, did Congress think about this precise issue, the issue that Justice Ginsburg is raising about a lawyer going from State to State with a different named plaintiff? Was that – was that part of what Congress was reacting to?
MR. MONAHAN: Yes, Justice Kagan, it’s my understanding that that was something they were concerned about. And they were concerned about, again, some States being too permissive in granting class certifications . . . . (Transcript, at 21-22.)
Justice Alito also pointed out that there is no due process right to have a class action, and Congress could do away with class actions altogether if it wanted to. (Transcript, at 23.)
Justice Ginsburg, however, later suggested to defense counsel that “maybe you could be right about preclusion but wrong about use of the anti-suit injunction” (Transcript, at 33), but that could mean that the state court would be the one deciding the preclusion issue, not the federal court. Some justices also appeared to be concerned about whether the Court, if it affirmed, would be taking away states’ ability to set somewhat different standards for class certification than the federal standards. Justice Sotomayor expressed a concern about how these injunctions should be framed narrowly.