A recent Ninth Circuit decision caught my eye. It addressed whether a state enforcement action can be barred by a class action settlement on the same issue, finding that it was barred in part, to the extent the suit sought restitution that was the same relief at issue in the class action.

In People v. Intelligender, LLC, 2014 U.S. App. LEXIS 21313 (9th Cir. Nov. 7, 2014), the defendant had settled a nationwide class action alleging that it made misrepresentations about its urine test designed to predict a fetus’s gender. The State of California was given notice of the proposed settlement and did not object. An enforcement action was later brought by the People of the State of California, through the San Diego City Attorney. The Ninth Circuit concluded that the State could litigate claims for statutory penalties and injunctive relief, because those claims implicated the State’s public interests. But the State could not pursue claims for restitution, because those same claims had been pursued by the class, and were barred by res judicata. The court explained:

That compensation was limited to those who obtained an incorrect result is a reflection of the bargaining and compromise inherent in settling disputes. Individual Gram class members who bought a Test and used it but did not obtain an incorrect result remain bound by the settlement, even though they will not receive any compensation. If the State wished to secure compensation for those class members, it had an opportunity to do so by intervening after receiving notice of the proposed settlement pursuant to 18 U.S.C. § 1715(a). This is the method CAFA established for states to seek equitable compensation for class members. The State chose not to use its authority, and the settlement was approved. Compensation is res judicata. (Id. at *26-27.)

This case is a good reminder for defendants that a well-crafted class action settlement will not necessarily buy them complete peace. Government enforcement actions may still be able to be brought on essentially the same claims. The type of relief sought may be limited, but here the civil penalties ($2,500 per violation) might be substantial, depending on how they would be calculated. In the insurance context, it is worth taking into consideration whether the state attorney general(s) or insurance regulator(s) have or might be likely to become involved in the issue that is before the court in the class action. 

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Photo of Wystan Ackerman Wystan Ackerman

Wystan Ackerman is a partner in Robinson+Cole’s Insurance + Reinsurance Group and handles a diverse range of property insurance litigation, including large business interruption cases, class actions, other complex litigation, and appeals. He also has substantial experience representing insurance companies in putative class…

Wystan Ackerman is a partner in Robinson+Cole’s Insurance + Reinsurance Group and handles a diverse range of property insurance litigation, including large business interruption cases, class actions, other complex litigation, and appeals. He also has substantial experience representing insurance companies in putative class actions involving homeowners’ insurance coverage and market conduct/claim-handling practices. He has been prominently involved in high-profile property insurance litigation concerning the September 11th catastrophe and Hurricane Katrina, and Chinese-made drywall. Based in the insurance capital of Hartford, Connecticut, Wystan writes the blog Insurance Class Actions Insider, which was selected by Lexis Nexis as a top insurance blog for 2011.

Wystan 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. He always had strong interests in history, politics and baseball and his heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox). Wystan says it was his early fascination with Lincoln that drove him to practice law. As a high school senior, he was one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified his interest in law and government. He went on to Bowdoin College, where he wrote for the Bowdoin Orient and majored in government. After Bowdoin, he went on to Columbia Law School. He also interned in the chambers of then-Judge Sonia Sotomayor on the Second Circuit. Wystan graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole.

When Wystan’s not at his desk, flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation he often can be found watching “Dora the Explorer” or reading or playing whiffleball with his young daughter, helping his wife with her business, Option Realty, reading a book about history or politics, or watching the Boston Red Sox.

Read Wystan’s rc.com bio.