September 22, 2011
Practice Groups:
Commercial Disputes
Class Action
Litigation Defense
No Pain Relief in Smith v. Bayer
Corporation: the Supreme Court Rules on
When a Federal Court Class Certification
Denial Bars a Similar State Court Action
In Smith v. Bayer Corporation, the United States Supreme Court recently interpreted the interplay
between class action litigation and the Anti-Injunction Act, a statute that generally prohibits federal
courts from enjoining state court proceedings. In reviewing whether the defendant could utilize a
rarely invoked exception to the Anti-Injunction Act to preclude the state court from ruling on a class
certification motion and thereby preclude the common problem of similar class actions pending in
multiple forums or courts, the Supreme Court ruled that a party to a federal court class action cannot
use the “relitigation exception” to the federal Anti-Injunction Act to enjoin a substantially similar state
court class action brought against that party unless the federal case (1) applies class action certification
standards identical to the state’s standards, and (2) shares at least one named plaintiff with the state
case.1
The Lower Court Actions
In 2001, prior to the enactment of the Class Action Fairness Act (“CAFA”),2 two different plaintiffs
brought similar claims against Bayer Corporation (“Bayer”) in two separate putative class action
lawsuits in West Virginia state court.3 In both suits, the plaintiffs sought to certify a class of West
Virginia residents on grounds that Bayer had allegedly violated West Virginia law through the sale of
the prescription drug Baycol.4 Bayer removed the first lawsuit to federal court based on traditional
diversity jurisdiction5 (the “federal suit”) but was unable to remove the second lawsuit (the “state
suit”).6
The court in the federal suit denied plaintiff’s motion for class certification.7 The court reasoned that
under West Virginia law, each plaintiff would need to show an “actual injury” from using Baycol,
which injury would vary among each plaintiff such that individual issues of fact would predominate
over issues common to all members of the class in contravention of Fed. R. Civ. P. 23(b)(3).8 Bayer
thereupon moved the federal court to enjoin the court in the state suit from considering class
certification on the basis that the classes in both cases were identical.9 The district court granted the
injunction.
On appeal, the Eighth Circuit Court of Appeals affirmed.10 The Eighth Circuit acknowledged that the
federal Anti-Injunction Act11 typically prevents a federal court from enjoining a state court but
believed that the subject injunction fell within the Act’s “relitigation exception.”12 The Eighth Circuit
reasoned that the exception applied because both cases invoked similar class action certification
standards, concerned the same classes, and advanced the same legal theories.13 In addition, the Eighth
Circuit found that the federal suit order could bind the state suit plaintiff because he was a member of
the putative class in the federal suit and his interests and those of the federal suit plaintiff aligned.14
No Pain Relief in Smith v. Bayer Corporation: the Supreme
Court Rules on When a Federal Court Class Certification
Denial Bars a Similar State Court Action
The Supreme Court Administers its Remedy
The United States Supreme Court reversed the Eighth Circuit in an opinion delivered by Justice
Kagan.15 In particular, the Court held that (1) the Anti-Injunction Act’s relitigation exception only
applies where a federal suit involves the same legal issues and the same parties as the state suit, and
(2) neither requirement was met in the case on review.16 While the Court acknowledged that both
suits alleged that Bayer’s sale of Baycol violated West Virginia consumer protection law and breached
Bayer’s warranties, the critical question for the Court was whether the state court would apply the
same class certification standard law as the federal court.17
The test adopted by the Supreme Court for the relitigation exception requires a federal court to
determine whether the state court would apply a different class certification standard regardless of any
similarities or discrepancies in the respective class action procedural rules.18 If the federal and state
class certification standards differ, then the federal court class certification decision does not have
preclusive effect on the state court and an injunction is not appropriate.19 In the case of uncertainty as
to whether the state court would apply the same certification standard as the federal court, the federal
court must leave the question of the preclusive effect of its prior decision to the state court.20
In Smith, the Court found that the class certification jurisprudence governed by Fed. R. Civ. P. 23 and
applied in the federal suit differed from the West Virginia class certification jurisprudence that the
court in the state suit would have applied.21 While the federal court determined class treatment was
improper because the “presence of a single individualized issue” acted to bar predominance, the state
court would have balanced many factors in deciding whether common or individual issues
predominated.22 “Indeed, [under West Virginia law], a single common issue in a case could outweigh
numerous individual questions.”23 Because the federal court resolved a different question from that
which the state court would have examined, the federal court decision “does not preclude the state
court’s determination[, and] … the federal court may not issue an injunction” under the AntiInjunction Act’s relitigation exception.24
In addition, the Court reaffirmed the principle that a prior judgment typically only binds an actual
party to the prior case (subject to a limited number of inapplicable exceptions).25 In Smith, while
acknowledging that an unnamed party of a certified class is a party for preclusion purposes, the
Supreme Court rejected the argument that the named plaintiff in the state suit was a “party” to the
federal suit for preclusion purposes where the federal court had denied class certification.26
Implications of the Decision
Notwithstanding its holding, the Supreme Court cautioned against the filing of multiple lawsuits
simply to improve chances of obtaining class certification. The Court noted that CAFA,27 through
which Congress significantly expanded federal court jurisdiction over class actions, was a mechanism
that could protect defendants from the “problems of relitigation” of class actions.28 The Court stated
that “we would expect federal courts to apply principles of comity to each other’s class certification
decisions when addressing a common dispute.”29 Indeed, the Court noted that “our legal system
generally relies on principles of stare decisis and comity among courts to mitigate the sometimes
substantial costs of similar litigation brought by different plaintiffs.”30
2
No Pain Relief in Smith v. Bayer Corporation: the Supreme
Court Rules on When a Federal Court Class Certification
Denial Bars a Similar State Court Action
Bruce Allensworth and Andrew Glass are each a partner and Ryan Tosi is an associate in the Boston
office of K&L Gates LLP. All are members of K&L Gates’ class action litigation defense group, and
would like to express their thanks to Patrick McCooe for his contributions to this client alert.
Authors:
R. Bruce Allensworth
bruce.allensworth@klgates.com
+1.617.261.3119
Andrew C. Glass
andrew.glass@klgates.com
+1.617.261.3107
Ryan M. Tosi
ryan.tosi@klgates.com
+1.617.261.3257
1
See 131 S. Ct. 2368 (U.S. 2011).
2
28 U.S.C. § 1332(d).
3
See Smith, 131 S. Ct. at *2376.
4
See id. at *2373.
5
28 U.S.C. § 1332(b).
6
See 131 S. Ct. at *2373. The federal suit was then transferred from federal court in West Virginia to federal court in
Minnesota pursuant to a preexisting order of the Judicial Panel on Multi-District Litigation. See id.
7
See id. at *2374.
8
See id.
9
See id.
10
See id.
3
No Pain Relief in Smith v. Bayer Corporation: the Supreme
Court Rules on When a Federal Court Class Certification
Denial Bars a Similar State Court Action
11
28 U.S.C. § 2283.
12
See Smith, 131 S. Ct. at *2374.
13
See id.
14
See id.
15
Justice Thomas joined only parts I and II-A of the opinion. See id. at *2373.
16
See id. at *2376.
17
See id. at *2377.
18
See id. at *2377-*2379.
19
See id.
20
See id.
21
See id. at *2378.
22
See id.
23
See id. (internal alterations and quotations omitted).
24
See id. at *2379.
25
See id.
26
See id.
27
28 U.S.C. §§ 1332(d), 1453.
28
See Smith, 131 S. Ct. at *2381-*2382.
29
See id. at *2382.
30
See id. at *2381.
4