Class Action Defense Cases–Negrete v. Allianz Life: Ninth Circuit Reverses District Court Order Enjoining Class Action Defendant From Settling Class Actions Pending In Other State And Federal Courts

May 6, 2008 | By: Michael J. Hassen

All Writs Act did not Permit District Court to Issue Injunction Prohibiting Class Action Defendant from Negotiating Settlements of Class Actions Pending in Other Federal Courts, and Anti-Injunction Act Barred District Court from Issuing Injunction Prohibiting Class Action Defendant from Negotiating Settlements of Class Actions Pending in State Court Ninth Circuit Holds

Plaintiff filed a class action complaint against Allianz Life Insurance Company of North America alleging inter alia violations of RICO (Racketeer Influenced and Corrupt Organizations Act) and breach of fiduciary duty arising out of defendant’s sale of fixed deferred annuities which, the class action alleged, was “‘an unsuitable financial product’ because the maturity date exceeded his life expectancy and restricted his access to principal without surrender charges.” Negrete v. Allianz Life Ins. Co. of North Am., 523 F.3d 1091, 2008 WL 1868993, *1 (9th Cir. 2008). The district court certified the litigation as a nationwide class action with respect to the RICO claims, and as a state-wide class action with respect to certain other claims, id. This class action was but one of several class actions filed against Allianz regarding the sales of annuities, including: Iorio v. Asset Marketing Inc., No. 05-CV-00633 (S.D.Cal.), filed in March 2005, in the United States District Court for the Southern District of California, and certified as a state-wide class action (covering a class that “partially overlaps the Negrete class”) in July 2006; Mooney v. Allianz Life Ins. Co. of North Am., No. 06-CV-00545, filed February 9, 2006, in the United States District Court for the District of Minnesota, and certified as a nationwide class action (covering a class that, according to defense attorneys, includes annuity transactions that “overlap those in _Negrete_”); and Castello v. Allianz Life Ins. Co. of North Am., Civ. No. MC03-20405, filed December 22, 2003, in a Minnesota state court and certified as a nationwide class action. Id. (The nationwide class action certification order in Negrete expressly excludes members of the nationwide class action certified in Castello, id., at *1 n.3.) In addition to these class actions, the Minnesota Attorney General filed State of Minnesota v. Allianz Life Ins. Co. of North Am., Civ. No. 07-581, on January 7, 2007, in a Minnesota state court (“_the AG Action_”), seeking “relief under Minnesota law on behalf of Minnesota residents who purchased Allianz’s fixed deferred annuity products” (covering a class that, according to defense attorneys, also may partially overlap the class certified in Negrete). Id., at *2. The district court entered an order “that effectively prevents [Allianz] from proceeding with any settlement negotiations on similar class action claims raised in any federal or state court without first obtaining permission from Negrete’s Co-Lead Counsel, and from finalizing a settlement in any other court ‘that resolves, in whole or in part, the claims brought in [the Negrete] action,’ without first obtaining the district court’s approval.” Id., at *1. The Ninth Circuit reversed.

The district court order arose as follows. Allianz entered into settlement discussions with the parties in Mooney, Castello, and the AG Action. Negrete, at *2. Plaintiffs’ lawyers in Negrete learned of these negotiations from a third party and requested that defense attorneys assure them that the settlement negotiations would not cover any of the claims addressed in or class members covered by the Negrete action; defense attorneys refused to provide such assurances so Negrete filed an ex parte application seeking an order that would prohibit Allianz from “settling, attempting to settle, negotiating, compromising, or releasing any claims, causes of action, or damages relating to any Allianz deferred annuity purchased by any Class Member in the Negrete/Healey matter during the relevant Class Period, in any other forum, including but not limited to, the Mooney matter, without the express approval of this Court and participation of Court appointed Co-Lead Counsel in the Negrete/Healey matter.” Id. While the district court order, issued without a hearing, “nominally” denied the application as “not authorized by the All Writs Act,” the court nonetheless ordered, “Any discussions of a settlement that would affect any claims brought in this litigation, other than claims of an individual plaintiff or class member, must be conducted or authorized by plaintiffs’ Co-Lead Counsel. Any proposed settlement that resolves, in whole or in part, the claims brought in this action shall first be subject to review and approval by the Court in this litigation.” Id. Defense attorneys appealed that order, id., at *3.

Defense attorneys argued that the injunction was improper under the All Writs Act and, further, that it was barred by the Anti-Injunction Act. Negrete, at *5. The Ninth Circuit explained that the defense arguments “depend on a determination that the injunction was directed against proceedings in other courts,” and concluded that “Plainly it was.” Id. The Circuit Court explained at page *5, “[T]he mere form of the injunction does not describe its true reach. In form, it is directed to Allianz and Allianz’s attorneys. In substance, it interferes with proceedings in other courts.” In essence, the district court order effectively acted as a restraint on other court proceedings, and therein laid its flaw. Id. As a matter of first impression in the Ninth Circuit, the Court held – following Grider v. Keystone Health Plan Cent., Inc., 500 F.3d 322 (3d Cir. 2007) – that the All Writs Act does not permit a district court to issue an order that enjoins proceedings in another district court. Id., at *6. Accordingly, its order was reversed, id., at *7.

Moreover, the Anti-Injunction Act restricts district court powers under the All Writs Act by “preclud[ing] unseemly interference with state court proceedings.” Negrete, at *7. This prohibition reflects “high public policy”; “It is not a minor revetment to be easily overcome; it is a fortress which may only be penetrated through the portals that Congress has made available.” Id. Here, the injunction issued by the district court plainly impacted judicial proceedings in the Minnesota state courts, id.; the issue, then, was whether the only potentially applicable exception – an injunction necessary to aid the district court’s jurisdiction – saved the injunction, id., at *8. The Ninth Circuit concluded that the exception did not apply, even though the state court “may reach a conclusion that differs from what a federal court would prefer,” id., at *9. Accordingly, the Anti-Injunction Act also required reversal of the district court order, id., at *10.

NOTE: We do not here discuss the Ninth Circuit’s consideration and rejection of plaintiffs’ claim that the Circuit Court lacked jurisdiction to consider the appeal; suffice it to say that the Ninth Circuit concluded the order was in effect an injunction, regardless of how it was denominated by the district court, and that the district court’s verbal representation that it would not enforce its order did not render the appeal moot. See Negrete, at *3-*5.

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