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Can a federal court stop state class certification?

BOSTON, MA — During oral arguments in Smith v. Bayer, the justices of the U.S. Supreme Court questioned whether a federal court had the authority to stop a state court from certifying a class action when the federal court had already denied certification in a similar case.

The case involves massive litigation over the cholesterol-lowering drug Baycol, which was manufactured by Bayer until it was pulled from the market in 2001 after being associated to a variety of adverse side effects, including kidney failure.

Plaintiffs filed thousands of personal injury lawsuits, most of which were consolidated into multidistrict litigation in a Minnesota federal court.

Outside of the MDL, other plaintiffs also sued, claiming economic loss, not personal injury. One of those plaintiffs brought a purported class action in West Virginia state court, seeking refunds and statutory damages on breach of warranty claims.

The case was removed to federal court and transferred to the MDL, which denied class certification and dismissed the matter on summary judgment. The district court held that economic loss claims could not be certified under Federal Rule of Civil Procedure 23(b)(3).

Later, Keith Smith and other plaintiffs again sought class certification in West Virginia state court for economic loss compensation. This case was not removed due to the inclusion of in-state defendants.

Bayer filed a motion in federal court to enjoin the state court from certifying the class based on its previous ruling that class status was improper, and the motion was granted under the re-litigation exception to the Anti-Injunction Act.

The 8th Circuit affirmed, and the Supreme Court agreed to decide whether a federal court can enjoin a state court from certifying such a class.

Due process right to class action?

At oral arguments on Tuesday, Richard A. Monahan of the Masters Law Firm in Charleston, W.Va., argued that the plaintiffs never got their day in court.

“They never received notice of the prior proceeding,” Monahan told the justices. “They never received an opportunity to appear and be heard [or] to opt out. They never received an opportunity to appeal the decision to deny certification.”

Just Ruth Bader Ginsburg asked if a ruling in the plaintiff’s favor allow litigants to get multiple bites of the apple simply by filing multiple purported class actions in different courts.

“All you have to do is get a new named plaintiff?” Ginsburg asked. “And it can be the same attorney” representing them?

“Yes, it could be the same attorney,” Monahan said.

Ginsburg wondered if that scenario defeated the purpose of an MDL.

“Doesn’t [the MDL ruling] deserve some measure of respect when the same thing is tried again?” she asked.

“Since it is a different party, since it’s not the same party itself [the state court] would look to other district court’s opinions [as] persuasive,” but not binding, Monahan replied.

When Monahan suggested a holding to the contrary would deny plaintiffs their due process rights, Justice Samuel Alito wasn’t so sure.

“Is there a due process right to have a class action?” he asked.

“[Plaintiffs have] a procedural right to seek class certification,” Monahan said. “There is no right to have one. We have to meet the requirements.”

‘That person had a lousy lawyer’

Philip S. Beck, a partner in the Chicago office of Bartlit Beck Herman Palenchar & Scott, argued for Bayer that a ruling for the plaintiffs would encourage forum shopping.

“Under their theory, they could file a class action in one county in West Virginia, and then if we … get an injunction [they] could file one in another county [and] eventually they would find one judge in one county in West Virginia who would reject our preclusion analysis,” Beck argued.

Justice Sonia Sotomayor asked how far a potential ruling in Bayer’s favor would go.

“Under the Anti-Injunction Act, would it permit a blanket injunction that says, against all future state court class proceedings across the United States?” Sotomayor asked.

“I don’t believe so,” Beck said. “Under the Anti-Injunction Act you have to have [the] same issue litigated.”

Justice Antonin Scalia asked how such a ruling would affect future plaintiffs.

“I’m the party trying to bring the later class action, and you tell me I can’t do it because somebody else sought a class action?” Justice Antonin Scalia asked. “And I say, ‘I don’t care, that’s somebody else…. I think that person had a lousy lawyer. Had I chosen the lawyer, we wouldn’t have lost.’ What’s your response to that?”

“Adequacy is, of course, part if the Rule 23 analysis” of determining if preclusion applies, Beck answered.

A ruling is expected later this term.