In Thorogood v. Sears, Roebuck & Co., 2012 WL 1508226 (7th Cir. May 1, 2012), the Seventh Circuit considered the propriety of an All Writs Act injunction in the face of a copy-cat class action for a “near-frivolous” claim. After detailing the abuse of the class action device by the plaintiffs’ lawyers, the Court nevertheless held that consistent with the Supreme Court’s decision in Smith v. Bayer Corp., 131 S. Ct. 2368 (2011), the injunction had to vacated. The Seventh Circuit’s decision is a sobering reminder to companies of the difficulties involved in enjoining copy-cat litigation after defeating class certification in light of Bayer.
In Thorogood, the named plaintiff sued Sears alleging that the clothes dryers he had bought from Sears had stained his clothes with rust because the drum of the dryer was not made entirely of stainless steel, as Thorogood alleged he believed it to be because of the words “stainless steel” imprinted on the dryer. Instead of being made entirely of stainless steel, part of the front of the drum was made of a ceramic-coated “mild steel.” The Court had previously held that the suit could not be maintained as a class action for lack of commonality, as “[i]t was inconceivable that all or even many other members of the proposed class had the same understanding of Sears’ advertising as Thorogood claimed to have.” The Court mused that “[o]ne would have to have a neurotic obsession with rust stains (or be a highly imaginative class action lawyer) to worry about Sears’ drum.”
After the class was decertified, Thorogood’s counsel ran to California state court and filed essentially the same complaint with a different named plaintiff, Murray. That case was removed to federal court, and though the district court judge in California initially held that Murray was collaterally estopped from bringing his action, Murray subsequently amended his complaint and the judge reversed her ruling. Sears thus was faced with a putative class action in California federal court which was nearly identical to the one it had already defeated in federal court in Illinois. The Seventh Circuit directed the Illinois district court to enjoin Murray from proceeding with his putative class action in California, which it did. Thorogood petitioned the Supreme Court for certiorari, which the Supreme court granted, vacating the Seventh Circuit’s decision ordering the district court to enjoin Murray from proceeding, and remanding the case to the Seventh Circuit for reconsideration in view of Bayer.
On remand, the Seventh Circuit was strident in its disapproval of plaintiffs’ litigation tactics: “We unsay nothing we said . . . in our . . . opinions in this protracted litigation, in criticism of the suits and of [the plaintiffs’] lawyer[s]; nothing we said about the susceptibility of class action litigation to abuse; and no part of our statement that abuse of litigation is a proper ground for the issuance of an injunction under the All Writs Act.” However, in the light of Bayer, the Seventh Circuit vacated the injunction. Bayer did not explicitly address the propriety of an All Writs Act injunction, which authorizes federal courts to issue “all writs necessary or appropriate in aid of their jurisdiction,” 28 U.S.C. section 1651(a), and which has been held to extend to non-parties. Rather, Bayer was concerned with the Anti-Injunction Act, 28 U.S.C. section 2283, which limits a federal court’s power to enjoin state litigation. The Anti-Injunction Act was not implicated in the Thorogood injunction because the California action had been removed to federal court. The Seventh Circuit found that the import of Bayer is that “’neither a proposed class action nor a rejected class action may bind nonparties.’” Murray, the named plaintiff in the California action, was never a party to Thorogood’s proposed class action because class notice was never sent in view of the decertification of the class. Class notice would have provided Murray the opportunity to either be a party or to opt out of the class. Accordingly, the Seventh Circuit held that Murray “was not bound by our ruling and is therefore free to file his own class action against Sears.”
Since the Supreme Court’s decision in Bayer, the use of injunctions to limit copy-cat class actions has been unclear. While the Seventh Circuit may believe that it was bound to reverse itself in light of Bayer, the Court never took into consideration the Supreme Court’s ages-old ruling that the All Writs Act may extend to non-parties. Nor did it heed its own caveat that “abuse of litigation is a proper ground for the issuance of an injunction under the All Writs Act.” The case law is far from being developed in this area. While defendants may have to develop other tools to defeat copy-cat class actions, such as the use of collateral estoppel, which here, was “mistakenly rejected” by the federal court in California, it is not time to throw in the towel on the use of All Writs Act injunctions to limit copy-cat litigation.