In an opinion written by Justice Kagan, the Supreme Court’s recent decision in Smith v. Bayer, 131 S. Ct. 2368 (2011) leaves class action plaintiffs with a way in which to potentially relitigate adverse certification decisions. Holding that a federal court could not enjoin a state court from determining a motion for certification similar to one that the federal court had already considered and denied, Bayer refused to apply principles of issue preclusion to thwart the state court plaintiff’s efforts. In so holding, Bayer emphasized the narrow reach of the Anti-Injunction Act’s relitigation exception and left the door open for members of the plaintiffs’ bar to have a second bite at the certification apple.
As a result of its sale of an allegedly hazardous prescription drug, Baycol, the Bayer Corporation quickly became the subject of hundreds of putative class actions asserted by Baycol purchasers. In efforts to streamline the lawsuits, the District Court of Minnesota ordered all federal cases against the corporation to be consolidated and litigated before the same judge. One of the cases eventually transferred to Minnesota had been commenced in West Virginia state court and removed to federal court on the basis of diversity jurisdiction. Once transferred, the plaintiff in that case sought to certify a class of all West Virginia residents who had purchased Baycol. The court eventually denied plaintiff’s certification motion.
Simultaneously, a different plaintiff was proceeding with his action against the Bayer Corporation and other defendants in West Virginia state court, having alleged the same allegations and claims as the first plaintiff. This state court case had not been removed, however, as several of the defendants were nondiverse West Virginia residents. Because the federal court had already denied a certification motion in nearly identical circumstances, the Bayer Corporation moved the federal court to enjoin the state court from ruling on the second class certification motion. The district court granted the injunction under the Anti-Injunction Act’s relitigation exception and the Eighth Circuit affirmed, finding that as an unnamed plaintiff in the federal action, the state court plaintiff was properly bound by the federal court’s ruling. On writ of certiorari, the Supreme Court in Bayer reversed and vacated the injunction.
Bayer recognized that while the exceptionally narrow relitigation exception was designed to implement the principles of claim and issue preclusion, those principles had not properly been applied to the present case. First, Bayer held that the federal court had not decided the same issue as the one presented to the state court. Although Federal Rule 23’s language was substantially identical to West Virginia Rule 23, the West Virginia state courts interpreted and applied the state rule differently than the federal courts, especially when considering predominance under Rule 23(b)(3). Because the rules were applied differently in the different forums, the Supreme Court held that the federal court had not decided the same issue as the one currently pending in the state court.
Second, Bayer held that the state court plaintiff could not be bound by the federal court’s judgment because he had not been a party to the federal lawsuit. Rejecting the Bayer Corporation’s argument, the Supreme Court stated that until a class has been certified, an unnamed class member is not properly considered a party for purposes of claim and issue preclusion. The Supreme Court recognized that under its holding, the Bayer Corporation would be forced to expend additional time and money to defend an almost identical class certification motion already denied by the federal court; however, it reasoned that principles of stare decisis and comity, as well as a defendant’s ability to remove actions to federal court under CAFA, would adequately protect the majority of defendants from relitigation.