Bayer Class Action Defense Cases–In re Baycol: Eighth Circuit Affirms Injunction Against State Court Deciding Class Action Certification Motion Because Federal Court Rejected Class Action Treatment Of Identical Claims By Different Plaintiffs

Jan 7, 2010 | By: Michael J. Hassen

Following Denial of Class Action Treatment, Federal Court did not Abuse Discretion in Granting Defense Motion to Enjoin State Court from Ruling on Class Action Certification Motion of Identical Claims brought by Different Plaintiffs Eighth Circuit Court Holds

Plaintiff George McCollins filed a putative class action against Bayer and other defendants, “who manufactured and produced Baycol, a prescription cholesterol lowering medication,” seeking damages for breach of warranties and violation of the West Virginia Consumer Credit and Protection Act (WVCCPA); Baycol was sold from 1997 to 2001, but was taken off the market following the deaths of 31 people. In re Baycol Products Litig., 593 F.3d 716 (8th Cir. 2010) [Slip Opn., at 2, 3.] McCollins’ class action complaint sought to represent residents of West Virginia, id., at 2. McCollins filed his complaint in West Virginia state court in 2001, but defense attorneys removed the class action to federal court on diversity grounds. Id., at 3. (The Circuit Court noted that had the class action been filed “a few years later,” it would have been removable under the Class Action Fairness Act (CAFA). Id.) Also in 2001, two other individuals (Keith Smith and Shirley Sperlazza) filed a similar class action in West Virginia state court, but it was not removed to federal court. Id., at 4. The Judicial Panel on Multidistrict Litigation (MDL) consolidated the McCollins class action with thousands of other individual and class action lawsuits involving Baycol, id., at 2, 3. As the sole putative class representative of West Virginia residents, plaintiff “had not experienced the side effect that led to Baycol’s withdrawal from the market[ and the] undisputed record evidence showed that he had physically benefitted from the drug.” Id., at 3. After extensive litigation, including the issuance of more than 160 pretrial orders, the district court rejected the motion by the Plaintiffs’ Steering Committee to certify the Master Class Action Complaint as a nationwide class action, “concluding that since such plaintiffs ‘would have to demonstrate that they were either injured by Baycol, or that Baycol did not provide them any health benefits[,]’ common issues did not predominate,” id., at 3. The district court later issued an order denying class action treatment to McCollins’ complaint on behalf of West Virginia residents, id., at 3, 4. Thereafter, Smith and Sperlazza sought class action certification in West Virginia state court of their Baycol class action; defense attorneys moved the federal court “to enjoin Smith and Sperlazza from relitigating in state court the certification of a West Virginia class.” Id., at 2. The district court granted the motion, and the Eighth Circuit affirmed. Id.

The Eighth Circuit explained that “the Anti-Injunction Act generally prohibits federal courts from interfering in state proceedings, [but] it permits injunctions necessary to ‘protect or effectuate its judgments.’” In re Baycol, at 5 (quoting 28 U.S.C. § 2283). The Circuit Court “review[ed] de novo the district court’s determination that the Act’s ‘relitigation exception’ applies…, and that it had personal jurisdiction over [Smith and Sperlazza],” id. (citations omitted). This, in turn, required an analysis of collateral estoppel requirements under West Virginia law. Id., at 6. The Circuit Court held that the issue presented by Smith and Sperlazza in their state court motion for class action treatment had been previously decided by the district court in connection with the McCollins action, and that they sought class action certification “on the same legal basis of the same class already denied in this case.” Id. The fact that West Virginia’s Rules of Civil Procedure Rule 23 would be applied in Smith and Sperlazza’s action rather than Fed.R.Civ.P. Rule 23 was of no moment, id. Put simply, “[T]he district court concluded that Baycol plaintiffs cannot state a claim under the WVCCPA without proof of harm or injury. Economic loss alone is insufficient. Certification under the state rule would undermine this conclusion of substantive state law properly made by the district court.” Id. (citation omitted).

The Eighth Circuit also found that the relitigation exception applied even though a ruling on class certification is “technically a procedural ruling.” In re Baycol, at 7. Because the district court’s denial of class action treatment was “based on its own ‘evaluation of the legal issues and the proof needed to establish them[,]’ namely its determination that all Baycol plaintiffs will need to show an individualized physical injury,” the ruling “has a preclusive effect and is inseparable from the certification question.” Id., at 8. In sum, the Circuit Court held at page 10, “We conclude that in the context of MDL proceedings, certification in a state court of the same class under the same legal theories previously rejected by the federal district court presents an issue sufficiently identical to warrant preclusion under federal common law.” Finally, the Circuit Court held that the district court did not abuse its discretion in granting the injunction because “relitigating in state court an issue previously decided in federal court constitutes irreparable harm,” id., at 13 (citation omitted). Accordingly, the Eighth Circuit affirmed the district court order. Id., at 14.

NOTE: With respect to Smith and Sperlazza’s argument that the district court lacked jurisdiction over them, the Court of Appeals explained that notice and an opportunity to opt out apply only to situations where absent class members “will be bound to a judgment on the merits of their claims.” In re Baycol, at 11-12 (citations omitted). This was not the case here because Smith and Sperlazza remained “free to pursue individual claims in state court.” Id., at 12.

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