Some courts have experimented with a partial class certification procedure whereby a class is certified to decide certain common issues on liability, and then any class member who wishes to pursue their own claim has to file their own individual lawsuit and prove the remainder of their case on liability and damages. One of the most prominent examples of this is the long-running tobacco litigation in Florida that has led to a number of appellate decisions, including R.J. Reynolds Tobacco Co. v. Engle, 672 So. 2d 39 (Fla. 3d DCA 1996) and Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla. 2006). Recently, the Florida Supreme Court issued a new decision, Philip Morris USA, Inc. v. Douglas, No. SC12-617, 2013 Fla. LEXIS 440 (Fla. Mar. 14, 2013), which focuses on the class trial’s preclusive effect on an individual class member’s subsequent suit. The Florida Supreme Court reached some conclusions about the applicability of res judicata to individual trials that may have significant implications for other bifurcated class actions.
In Engle, a class was certified against purportedly the entire tobacco industry, consisting of persons (or their survivors) who suffered from smoking-related diseases and medical conditions, or died from them. A year-long trial was conducted at which the jury decided certain common liability issues. After the jury verdict in favor of the plaintiffs was appealed to the Florida Supreme Court, what was upheld was certain findings, most notably that smoking cigarettes causes certain diseases (including lung cancer), that nicotine is addictive, that the defendants sold cigarettes that were defective and unreasonably dangerous (without specificity as to particular brands), and that the defendants were negligent. Id. at *10. The Florida Supreme Court concluded in its prior decision that these findings would have “res judicata” effect in individual damages actions brought by class members. Id.
The Philip Morris v. Douglas individual case was then tried. The jury was asked to find, and found that Douglas was a member of the Engle class, and that her smoking cigarettes manufactured by the named defendants was a legal cause of her death. The jury apportioned fault between Douglas and each of the named defendants. The verdict, prior to apportionment, was $5 million. Id. at *14-15.
In the Douglas appeal, the defendants argued that the findings in the class trial were too general to be binding in individual actions. The Florida Supreme Court rejected this, refusing to revisit its prior decision. It explained that the class trial was sufficient to prove general causation (such as that the defendants’ cigarettes caused the diseases in question) and left for individual trials questions of individual causation, such as whether “the disease at issue was the result of a genetic predisposition, exposure to an occupational hazard, or something unrelated to the plaintiff’s addiction to smoking the Engle defendants’ cigarettes.” Id. at *22.
The second issue before the Florida Supreme Court was whether due process was violated because it was unclear what theories of liability the jury relied upon in the class trial. The defendants argued, among other things, that the jury in the class trial had not found that any particular brands of cigarettes were defective and unreasonably dangerous. The court found that the defendants had adequate notice of what was being tried and ample opportunity to present their case in the year-long class trial. Id. at *31.
The opinion then focused on the law of res judicata (claim preclusion) and collateral estoppel (issue preclusion), and which doctrine applied to the findings made by the jury at the class trial. This was a point on which Justice Canady dissented. The majority concluded that res judicata (claim preclusion) was applicable because it “prevents the same parties from relitigating the same cause of action in a second lawsuit,” and the class members were parties to the first case and the causes of action were the same. Id. at *35-36 (emphasis in original). The majority concluded that issue preclusion applies only where the second suit involves a different cause of action. The majority also found that the requirement for res judicata that there be a final judgment on the merits was satisfied. Citing a few federal district court opinions, the majority concluded that “[w]hen class actions are certified to resolve less than an entire cause of action, the final judgment from the first trial on the common liability issues is entitled to res judicata effect in the subsequent trial on individual issues.” Id. at *40-41.
Dissenting, Justice Canady found the application of claim preclusion improper, explaining that “the jury’s verdict did not fully adjudicate any claim and did not result in a final judgment on the merits,” noting that “the majority has cited no authority – either within or outside the class action context – holding that a judgment that adjudicates only a portion of a claim is entitled to claim-preclusive effect.” Id. at *53-54 (Canady, J., dissenting). Justice Canady would have ruled that the findings at the class trial were insufficient to establish that the particular brands of cigarettes smoked by Douglas were defective, and thus that she would have to prove that in order to recover in her individual case. Justice Canady noted that the plaintiffs could have asked the jury in the class trial for a finding that all brands of cigarettes sold by all defendants were defective, but they failed to do so. Id. at *47-48.
Although he was only one dissenting vote on a seven-member court, in my view, Justice Canady seems right as a technical matter with respect to claim preclusion vs. issue preclusion. The way I learned the difference between claim preclusion and issue preclusion in law school was that, to have claim preclusion, you needed to have a final judgment, and then the same parties could not pursue issues that they actually raised or could have raised in the prior litigation. The Engle case seems to be a much better fit for issue preclusion – the class jury decided certain issues, but clearly not the whole dispute. To the extent that the court’s majority might be creating a special rule for class actions, is that appropriate? Is there anything in the class action rule that justifies creating a different rule for claim preclusion than would apply in a non-class case? Issue preclusion seems to be the more applicable doctrine here and would still provide class members with substantial benefit from the class verdict.
What lessons might be learned here? I think this case demonstrates the importance, as I’ve noted before, of evaluating at the class certification stage how the case will be tried. In this kind of bifurcated class action (which is rare), the courts should be taking a hard look at how the class phase will be tried and how the individual cases will then be tried, and whether the whole plan will work. When it comes to the class trial, both sides should be very clear on what is being tried if the court wants to avoid the kind of collateral litigation that has followed Engle.