Supreme Court on Anti-Injunction Act — Federal Denial of Class Certification Not Binding on State Court that Applies Different Standards — Absent Class Members Not Bound by Decisions in Putative (Not Certified) Class Action — Good Quotes

From Smith v. Bayer Corp., 180 L. Ed. 2d 341 (2011):

[T]he "relitigation exception" to the Anti-Injunction Act ... permits a federal court to enjoin a state proceeding only in rare cases, when necessary to "protect or effectuate [the federal court's] judgments." 28 U.S.C. § 2283. Here, that standard was not met for two reasons. First, the issue presented in the state court was not identical to the one decided in the federal tribunal. And second, the plaintiff in the state court did not have the requisite connection to the federal suit to be bound by the District Court's judgment. ***

In August 2001, George McCollins sued respondent Bayer Corporation in the Circuit Court of Cabell County, West Virginia, asserting various state-law claims arising from Bayer's sale of an allegedly hazardous prescription drug called Baycol (which Bayer withdrew from the market that same month). ***

Approximately one month later, the suit now before us began in a different part of West Virginia. Petitioners Keith Smith and Shirley Sperlazza (Smith for short) filed state-law claims against Bayer, similar to those raised in McCollins' suit, in the Circuit Court of Brooke County, West Virginia. ***

In January 2002, Bayer removed McCollins' case to the United States District Court for the Southern District of West Virginia on the basis of diversity jurisdiction. *** Bayer, however, could not remove Smith's case to federal court because Smith had sued several West Virginia defendants in addition to Bayer, and so the suit lacked complete diversity. ***

Over the next six years, the two cases proceeded along their separate pretrial paths at roughly the same pace. By 2008, both courts were preparing to turn to their respective plaintiffs' motions for class certification. The Federal District Court was the first to reach a decision.

Applying Federal Rule of Civil Procedure 23, the District Court declined to certify McCollins' proposed class of West Virginia Baycol purchasers. ***

Although McCollins' suit was now concluded, Bayer asked the District Court *** [to] enjoin the West Virginia state court from hearing Smith's motion to certify a class. According to Bayer, that order was appropriate to protect the District Court's judgment in McCollins' suit denying class certification. The District Court agreed and granted the injunction.

The Court of Appeals for the Eighth Circuit affirmed. ***We granted certiorari, 561 U.S. __, 131 S. Ct. 61, 177 L. Ed. 2d 1150 (2010), because the order issued here implicates two circuit splits arising from application of the Anti-Injunction Act's relitigation exception. The first involves the requirement of preclusion law that a subsequent suit raise the "same issue" as a previous case [here, when state and federal rules are the same but may be interpreted differently].

Footnote 3. Compare In re Baycol Prods. Litigation, 593 F.3d 716, 723 (CA8 2010) (case below) (holding that two cases involve the same issue when "[t]he state and federal [class] certification rules . . . are not significantly different"), with J. R. Clearwater Inc. v. Ashland Chemical Co., 93 F.3d 176, 180 (CA5 1996) (holding that two cases implicate different issues even when "[the state rule] is modeled on . . . the Federal Rules" because a "[state] court might well exercise [its] discretion in a different manner").

The second concerns the scope of the rule that a court's judgment cannot bind nonparties [i.e., absent class members of an uncertified class].

Footnote 4. Compare 593 F.3d at 724 ("[T]he denial of class certification is binding on unnamed [putative] class members" because they are "in privity to [the parties] in the prior action") and In re Bridgestone/Firestone, Inc., Tires Prods. Liability Litigation, 333 F.3d 763, 768-769 (CA7 2003) (same), with In re Ford Motor Co., 471 F.3d 1233, 1245 (CA11 2006) (holding that "[t]he denial of class certification" prevents a court from "binding" anyone other than "the parties appearing before it") and In re General Motors Corp. Pick-Up Truck Fuel Tank Prods. Liability Litigation, 134 F.3d 133, 141 (CA3 1998) (holding that putative "class members are not parties" and so cannot be bound by a court's ruling when "there is no class pending").

We think the District Court erred on both grounds when it granted the injunction, and we now reverse.


*** [I]ssuing an injunction under the relitigation exception is resorting to heavy artillery. For that reason, every benefit of the doubt goes toward the state court, see Atlantic Coast Line, 398 U.S., at 287, 297, 90 S. Ct. 1739, 26 L. Ed. 2d 234; an injunction can issue only if preclusion is clear beyond peradventure.

The question here is whether the federal court's rejection of McCollins' proposed class precluded a later adjudication in state court of Smith's certification motion. For the federal court's determination of the class issue to have this preclusive effect, at least two conditions must be met. First, the issue the federal court decided must be the same as the one presented in the state tribunal.... And second, Smith must have been a party to the federal suit, or else must fall within one of a few discrete exceptions to the general rule against binding nonparties. In fact, as we will explain, the issues before the two courts were not the same, and Smith was neither a party nor the exceptional kind of nonparty who can be bound. So the courts below erred in finding the certification issue precluded, and erred all the more in thinking an injunction appropriate.

Footnote 6 We have held that federal common law governs the preclusive effect of a decision of a federal court sitting in diversity. See Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508, 121 S. Ct. 1021, 149 L. Ed. 2d 32 (2001).



*** The Eighth Circuit relied almost exclusively on the near-identity of the two Rules' texts. See 593 F.3d at 723. That was the right place to start, but not to end. Federal and state courts, after all, can and do apply identically worded procedural provisions in widely varying ways. If a State's procedural provision tracks the language of a Federal Rule, but a state court interprets that provision in a manner federal courts have not, then the state court is using a different standard and thus deciding a different issue. See 18 Wright & Miller § 4417, at 454 (stating that preclusion is "inappropriate" when "different legal standards . . . masquerad[e] behind similar legal labels"). At the other extreme, Smith contends that the source of law is all that matters: a different sovereign must in each and every case "have the opportunity, if it chooses, to construe its procedural rule differently." Brief for Petitioners 22 (quoting ALI, Principles of the Law, Aggregate Litigation § 2.11, Reporters' Notes, cmt. b, p. 181 (2010)). But if state courts have made crystal clear that they follow the same approach as the federal court applied, we see no need to ignore that determination; in that event, the issues in the two cases would indeed be the same. So a federal court considering whether the relitigation exception applies should examine whether state law parallels its federal counterpart. But as suggested earlier..., the federal court must resolve any uncertainty on that score by leaving the question of preclusion to the state courts.

Under this approach, the West Virginia Supreme Court has gone some way toward resolving the matter before us by declaring its independence from federal courts' interpretation of the Federal Rules — and particularly of Rule 23. ***

[T]he West Virginia Supreme Court has disapproved the approach to Rule 23(b)(3)'s predominance requirement that the Federal District Court embraced. ***


The injunction issued here runs into another basic premise of preclusion law: A court's judgment binds only the parties to a suit, subject to a handful of discrete and limited exceptions. *** Against this backdrop, Bayer defends the decision below by arguing that Smith — an unnamed member of a proposed but uncertified class — qualifies as a party to the McCollins litigation.... Alternatively, Bayer claims that the District Court's judgment binds Smith under the recognized exception to the rule against nonparty preclusion for members of class actions.... We think neither contention has merit.

Bayer's first claim ill-comports with any proper understanding of what a "party" is. In general, "[a] 'party' to litigation is '[o]ne by or against whom a lawsuit is brought,'" ... or one who "become[s] a party by intervention, substitution, or third-party practice".... And we have further held that an unnamed member of a certified class may be "considered a 'party' for the [particular] purpos[e] of appealing" an adverse judgment. Devlin v. Scardelletti, 536 U.S. 1, 7, 122 S. Ct. 2005, 153 L. Ed. 2d 27 (2002). But as the dissent in Devlin noted, no one in that case was "willing to advance the novel and surely erroneous argument that a nonnamed class member is a party to the class-action litigation before the class is certified." Id., at 16, n. 1, 122 S. Ct. 2005, 153 L. Ed. 2d 27 (opinion of SCALIA, J.). Still less does that argument make sense once certification is denied. The definition of the term "party" can on no account be stretched so far as to cover a person like Smith, whom the plaintiff in a lawsuit was denied leave to represent. If the judgment in the McCollins [*354] litigation can indeed bind Smith, it must do so under principles of nonparty preclusion.

Footnote 10. In support of its claim that [**28] Smith counts as a party, Bayer cites two cases in which we held that a putative member of an uncertified class may wait until after the court rules on the certification motion to file an individual claim or move to intervene in the suit. See Brief for Respondent 32-33 (citing United Airlines, Inc. v. McDonald, 432 U.S. 385, 97 S. Ct. 2464, 53 L. Ed. 2d 423 (1977); American Pipe & Constr. Co. v. Utah, 414 U.S. 538, 94 S. Ct. 756, 38 L. Ed. 2d 713 (1974)). But these cases, which were specifically grounded in policies of judicial administration, demonstrate only that a person not a party to a class suit may receive certain benefits (such as the tolling of a limitations period) related to that proceeding. See id., at 553, 94 S. Ct. 756, 38 L. Ed. 2d 713; McDonald, 432 U.S., at 394, n. 15, 97 S. Ct. 2464, 53 L. Ed. 2d 423. That result is consistent with a commonplace of preclusion law — that nonparties sometimes may benefit from, even though they cannot be bound by, former litigation. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326-333, 99 S. Ct. 645, 58 L. Ed. 2d 552 (1979); Blonder-Tongue Laboratories, Inc. v. University of Ill. Foundation, 402 U.S. 313, 91 S. Ct. 1434, 28 L. Ed. 2d 788 (1971).

*** If we know one thing about the McCollins suit, we know that it was not a class action. Indeed, the very ruling that Bayer argues ought to be given preclusive effect is the District Court's decision that a class could not properly be certified. So Bayer wants to bind Smith as a member of a class action (because it is only as such that a nonparty in Smith's situation can be bound) to a determination that there could not be a class action. And if the logic of that position is not immediately transparent, here is Bayer's attempt to clarify: "[U]ntil the moment when class certi-fication was denied, the McCollins case was a properly conducted class action." ***That is true, according to Bayer, because McCollins' interests were aligned with the members of the class he proposed and he "act[ed] in a representative capacity when he sought class certification."***

But wishing does not make it so. McCollins sought class certification, but he failed to obtain that result. Because the District Court found that individual issues predominated, it held that the action did not satisfy Federal Rule 23's requirements for class proceedings. In these circumstances, we cannot say that a properly conducted class action existed at any time in the litigation. Federal Rule 23 determines what is and is not a class action in federal court, where McCollins brought his suit. So in the absence of a certification under that Rule, the precondition for binding Smith was not met. Neither a proposed class action nor a rejected class action may bind nonparties. What does have this effect is a class action approved under Rule 23. But McCollins' lawsuit was never that.

We made essentially these same points in Taylor v. Sturgell just a few Terms ago. The question there concerned the propriety of binding nonparties under a theory of "virtual representation" based on "identity of interests and some kind of relationship between parties and nonparties." 553 U.S., at 901, 128 S. Ct. 2161, 171 L. Ed. 2d 155. We rejected the theory unanimously, explaining that it "would 'recogniz[e], in effect, a common-law kind of class action.'" Ibid. Such a device, we objected, would authorize preclusion "shorn of [Rule 23's] procedural protections." Ibid. Or as otherwise stated in the opinion: We could not allow "circumvent[ion]" of Rule 23's protections through a "virtual representation doctrine that allowed courts to 'create de facto class actions at will.'" Ibid. We could hardly have been more clear that a "properly conducted class action," with binding effect on nonparties, can come about in federal courts in just one way -- through the procedure set out in Rule 23. Bayer attempts to distinguish Taylor by noting that the party in the prior litigation there did not propose a class action. But we do not see why that difference matters. Yes, McCollins wished to represent a class, and made a motion to that effect. But it did not come to pass. To allow McCollins' suit to bind nonparties would be to adopt the very theory Taylor rejected.

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