When a federal court grants preliminary approval to a proposed class action settlement, can it enjoin parallel state court proceedings while the notice and final approval process take place?  Judge Fallon of the Eastern District of Louisiana recently found such an injunction appropriate in In re Chinese-Manufactured Drywall Products Liability Litigation, 2011 U.S. Dist. LEXIS 62222 (E.D. La. June 9, 2011). 

In this case, a proposed class action settlement was reached between the Plaintiffs’ Steering Committee and Interior Exterior Building Supply, LP, Arch Insurance Company and Liberty Mutual Fire Insurance Company, involving tendering the policy limits for the coverage provided by Arch and Liberty Mutual.  Southern Homes, LLC, a homebuilder, had also sued Interior Exterior in Louisiana state court in Orleans Parish, and had a summary judgment motion pending in state court when the federal class action settlement came up for preliminary approval.

Judge Fallon’s opinion focuses on the exception to the Anti-Injunction Act that allows a federal court to enjoin state proceedings “where it is necessary in aid of jurisdiction.”  The opinion states that ordinarily this exception is applicable where the federal court has in rem jurisdiction, and is rarely applicable to in personam jurisdiction.  Judge Fallon explains that there is a circuit split on the question of whether, or under what circumstances, such an injunction is appropriate in aid of an MDL court’s jurisdiction given the nature and complexity of MDL proceedings.  Judge Fallon concludes that the injunction in the Chinese Drywall litigation was appropriate because the MDL proceeding was analogous to an in rem proceeding:

The Court finds that a conceptional res has been created in this MDL litigation, as evidenced by the complexity of the proceedings and claims, the fact the litigation has been underway for almost two years, and the substantial amount of effort and expense put into the litigation by the parties and Court alike. The MDL litigation, as it more specifically pertains to the present Motion, is sufficiently progressed: the parties have engaged in extensive discovery and depositions, a motion for class certification seeking to create a class with claims against InEx was filed and set for hearing, a trial against InEx was scheduled and a case management order issued, and most importantly, the InEx Settlement Agreement is a class action settlement agreement of the InEx-related claims, the Court has preliminarily approved this Agreement, and notice is in the process of issuance. Additionally, an actual res has been created now by the InEx Settlement Agreement which involves the tendering of all of InEx’s primary insurance coverage. Because there is a possibility that Southern’s state court hearing and proceedings could affect and potentially disrupt the InEx Settlement Agreement and the res created thereby, these proceedings should be stayed. Notably, the stay is only temporary and contingent upon the successful final approval by the Court of the InEx Settlement Agreement; thus, in the case the Court does not give its final approval, Southern will then be free to pursue its state court case against InEx, and if the Agreement is finally approved then presumably Southern will benefit as a class member or choose to opt-out.  (In re Chinese-Manufactured Drywall Litigation, 2011 U.S. Dist. LEXIS 62222, at *18-19.)

This is an important issue because when a class action settlement is reached, both sides understandably want to bring other litigation on the same issues to a halt, both to avoid litigation costs and to prevent developments in parallel litigation that might impact the settlement or its approval.  The availability of this kind of temporary stay to allow a proposed class action settlement to be considered should not depend on whether the litigation is an MDL or other complex litigation, or how much work has been done in the case.  An amendment to the Anti-Injunction Act or to the Federal Rules of Civil Procedure might be appropriate to address this narrow but important issue. 

 

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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and most of the class actions I’ve defended have been brought against insurance companies. I’ve also handled some involving products liability, managed care, health care, utilities, financial services, higher education and environmental issues.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at work, you might find me running lines or watching a musical with my teenage daughter who hopes to be a Broadway star (or taking her to voice or dance lessons) or reading a good book.

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