General Release in Class Action Bars Subsequent Claim by Non-Opt-Out Only If Issues in Second Suit Are Identical to Those in First — Circuit Split

The plaintiff in Pinnacle Pizza Co. v. Little Caesar Enters., 2008 U.S. Dist. LEXIS 44651 (D. S.D. June 5, 2008) — a Little Caesars franchise owner — did not opt out of a class action settlement in 2001 and, as a result, conferred a general release in favor the defendants. The defendants asserted that, although the claims in the class action were unrelated, the language of the release controlled. Rejected:

The court finds that the 2001 release should not be construed to operate against claims unrelated to the class action lawsuit. Although this appears to be an issue of first impression in Michigan, this result is consistent with that reached by other jurisdictions that have considered the issue. In TBK Partners, Ltd. v. Western Union Corporation, 675 F.2d 456, 461 (2d Cir. 1982), the Second Circuit held that a release contained in a class action settlement should only be effective "where there is a realistic identity of issues between the settled class action and subsequent suit, and where the relationship between the suits is at the time of the class action foreseeably obvious to notify class members." See also Thompson v. Edward D. Jones & Co., 992 F.2d 187, 190-91 (8th Cir. 1993).

LCE argues that the "identity of issues" test for determining the scope of a class action release, as discussed in Thompson, has been disregarded in the Eighth Circuit, citing In re General American Life Insurance Company Sales Practices Litigation, 357 F.3d 800 (8th Cir. 2004). *** Although the Eighth Circuit in General American Life found that the general release in the class action lawsuit acted as a bar to plaintiff's claim, it is significant that the plaintiff's claim was substantially similar to the claim brought in the class action. While the court did not explicitly address the "identity of issues" test mentioned in Thompson, it appears from the facts of General American Life that if the Thompson test had been applied, the test would have been satisfied. Therefore, the court does not find LCE's reliance on General American Life convincing.

Share this article:


Recent Posts