Document: 516 U.S. 367116 S.Ct. 873134 L.Ed.2d 6 MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD., et al., Petitioners,v.Lawrence EPSTEIN al. No. 94-1809. Supreme Court of the United States Argued Nov. 27, 1995. Decided Feb. 1996 Syllabus* A tender offer resulting in petitioner Matsushita Electric Industrial Co.'s acquisition MCA, Inc., a Delaware corporation, precipitated two lawsuits on behalf MCA's stockholders. While first, class action based purely state-law claims, was pending, second suit filed California federal court, alleging that Matsushita's violated certain Securities Exchange Commission Rules promulgated under Act 1934 (Exchange Act). Section 27 confers exclusive jurisdiction upon courts such suits. prevailed case, and while judgment appeal, parties to state reached settlement, agreeing, inter alia, members who did not opt out would waive all claims connection with offer, including those asserted action. The Chancery approved agreement, affirmed. Respondents are both classes settlement class. In instant Ninth Circuit found bar further prosecution Full Faith Credit Act, 28 U.S.C. § 1738, fashioned test limiting preclusive force state-court could "have been extinguished by issue effect an adjudication claims." Held: is entitled full faith credit, notwithstanding fact it released within courts. Pp. __-__. (a) 1738—which directs treat same respect receive rendering State's courts—is generally applicable cases which incorporates class-action releasing solely courts' jurisdiction. court plainly product "judicial proceeding" meaning might litigation exclusively does necessarily make 1738 inapplicable, Marrese v. American Academy Orthopaedic Surgeons, 470 373, 380, 105 1327, 1331, 84 274. (b) provides analytical framework for deciding whether precludes this must first determine law indicates claim be barred from State; if so, decide whether, as exception should refuse give judgment. P. 878. (c) have provided rules regarding agreements subsequent suits also spoken judgments indicating when approves global release its will preclude on-going or future any claims. Thus, appears proceeding, respondents pressed their Court. specifically refers lawsuit, State fair notice adequate, acknowledge they (d) Because res judicata law, proceed step analysis ask partially repealed 1738. Any modification implied, but has seldom, ever, held statute impliedly There no suggestion Congress meant contravene common-law preclusion repeal 1738's express statutory requirement. Nor evince intent prevent litigant voluntarily judicially settlements. Assuming intended serve at least general purposes achieving greater uniformity construction more effective expert application threatens neither purpose upholds addition, other provisions suggest intend create violations precedent supports conclusion concerns underlying grant undermined approval settlements Even stake, there universal right litigate court. See, e.g., Allen McCurry, 449 90, 105, 101 411, 420, 66 308. (e) subject-matter relied inapposite here, where had over defendants. 884. 50 F.3d 644 (C.A.9 1995), reversed remanded. THOMAS, J., delivered opinion Court, REHNQUIST, C.J., O'CONNOR, SCALIA, KENNEDY, SOUTER, BREYER, JJ., joined, STEVENS, joined Parts I, II-A, II-C, GINSBURG, part. concurring part dissenting part, Part II-B. On Writ Certiorari Appeals Circuit. Barry R. Ostrager, New York City, petitioners. Henry Monaghan, respondents. Justice THOMAS 1 This case presents question may withhold credit approving simply because releases answer no. Absent partial another statute, rendered. 2 * 1990, Co. made common stock corporation. only resulted holders stock. First, against MCA directors breach fiduciary duty failing maximize shareholder value. complaint later amended additional for, waste corporate assets exposing liability securities laws. added defendant accused conspiring violate law. 3 Federal District California. named d alleged (SEC) 10b-3 14d-10.1 These were created SEC pursuant 1968 Williams Amendments Act), 48 Stat. 881, amended, 15 78a seq. brought enforce regulations thereunder. See 78aa. declined certify class, entered summary Matsushita, dismissed case. plaintiffs appealed 4 After appeal before handed down decision, negotiated settlement.2 exchange arising Matsushita-MCA acquisition, defendants deposit $2 million into fund distributed pro rata As required Rule 23, modeled Civil Procedure certified proposed settlement. informed request exclusion appear present argument scheduled hearing fairness particular, stated "[b]y filing valid Request Exclusion, member Settlement Class precluded individually seeking pursue . Actions, relating events Actions." App. Pet. Cert. 96a. Two notices mailed published national edition Wall Street Journal. then hearing. several objectors, representation adequate fair. 5 order final incorporated terms providing: All rights causes (state federal, limited thereunder, otherwise), known unknown are, (other than validly requested therefrom), arise now hereafter Merger Agreement, Tender Offer, Distribution Capital Contribution employee compensation arrangements, Agreements, Initial Proposed Settlement, without limitation Actions hereby compromised, settled, discharged prejudice virtue proceedings herein Order Final Judgment." re Inc. Shareholders Litigation, C.A. 11740 (Feb. 22, 1993), reprinted 74a-75a (emphasis added). 7 met requirements due process. 633 A.2d 370 (1993) (judgment order). 8 plaintiff classes. Following issuance propo sed litigation, opted nor appeared contest Circuit, invoked 9 rejected petitioner's argument, ruling apply. Epstein 644, 661-666 (1995). Instead, "could Id., 665. lower taken varying approaches determining judgment, derivative action, claims.3 We granted certiorari clarify important area 515 ----, 115 2576, 132 826 II 10 mandates proceedings" "shall every usage taken." thus state. "employ own judgments," "accept chosen Kremer Chemical Constr. Corp., 456 461, 481-482, 102 1883, 1898, 72 262 (1982). failed follow dictates we reverse. 11 differs respects previously considered our Act. stressed, agreement Though urge "the irrelevance section litigation," Brief 25, do think either these features exempts operation 12 That result rather individual, undermine initial applicability Cf. McDonald West Branch, 466 284, 287-288, 104 1799, 1801-1802, 80 302 (1984) (holding apply arbitration awards proceeding"). Therefore, like judicial presumptively 13 Further, irrelevant work Our decision 274 (1985), clear raised defense suit, allegedly "claim i napplicable." S.Ct., 1332 so holding, primarily supra, held, Title VII Kremer, said, "implies absent determines prior involving courts." Marrese, U.S., 381, 1332. Accordingly, decided "a some circumstances 14 discussed Nash County Board Education Biltmore Co., 640 F.2d 484 (C.A.4), cert. denied, 454 878, 359, 70 188 (1981), concerned Nash, antitrust prevented 382, n. 2, 1333, 2. suggested approach outlined involve settlement: is, control outset. ibid. accord precedents, conclude B court's When faced claim, look ascertain id., 381-382, 1332-1333. If particular state, next "as 1738," "should [the] judgment." 383, 1333. Migra Warren City School Dist. Bd. Ed., 465 75, 80, 892, 896, 79 56 ("[I]n absence modifying [a] determined [state] law"). 16 observed inquiry always yield direct answer. Usually, occasion address specific can court." Where consideration, consequently find guidance judgments. 382-383, (observing "[North Carolina] gives consent judgment[s]"). Here, addition providing 17 traditionally treated impact preclusion. Early afford presented trial Ezzes Ackerman, 234 444, 445-446 (Del.1967) ("[A] after merits bars claim. [T]he available pleadings framing issues permitted raising sought facts time action"). perceived, however, [was] modified regard actions," Union Square Associates 11028, 1993 WL 220528, *3 (June 16, Court's Nottingham Partners Dana, 564 1089 (1989). 18 Nottingham, pending eliminated requirement produced actions: 19 " '[I]n achieve comprehensive relitigation settled questions core permit identical factual predicate even though presentable action.' A.2d, 1106 (quoting TBK Partners, Ltd. Western 675 456, 460 (C.A.2 1982)). 20 Square, (relying directly hold settling duplicative suit). indicate if, rendered still pursuit 21 manifested understanding "[t]he validity executing conjunction termination long recognized More specifically, history implicitly explicitly included release, 1105 (citation omitted). correctly lacked actual authority dismissal collateral preventing prosecuting Perhaps clearest statement view matter articulated preceding one: "When challenged transaction process requirements, bound doctrine cannot subsequently relitigate 598 687, 691 (1991).4 aware suggests otherwise. 22 Given statements Chancery. clearly scope since lawsuit. see Prezant De Angelis, 636 915, 920 (1994), found, affirmed, "fair, reasonable best interests class" "in compliance process." 73a, 74a. Phillips Petroleum Shutts, 472 797, 812, 2965, 2974, 86 628 (1985) (due requires "notice plus opportunity heard participate litigation"). "further plaintiffs[,] representatives Class, fairly adequately protected Class." 73a. 2974 "that times represent members").5 Under "[a]ll unless, 23(b)(3) timely election exclusion." H. Newberg, 2755, p. 1224 (1977). Cooper Reserve Bank Richmond, 467 867, 874, 2794, 2798, 81 718 ("There course dispute elementary principles properly entertained binding deny that, shareholders stock, never out; bound, then, judgment.6 23 contains language relationship related proceedings. implied. "general justify finding implied 1738." 386, 1334. "Resolution depend well nature involved primary consideration Congress." Ibid. 24 historical matter, Parsons Steel, First Alabama Bank, 474 518, 523-524, 106 768, 771-772, 88 877 (1986) (Anti-Injunction limit 1738); 83-85, 897-898, (§ 1983 468-476, 1890-1895, (1982) (Title Rights 1964 96-105, 415-421, 308 (1980) 1738). But cf. Brown Felsen, 442 127, 138-139, 99 2205, 2212-2213, 60 767 (1979) (declining debt collection proceeding bankruptcy discussing repeals). rarity discovered repeals relatively stringent standard findings, namely, 'irreconcilable conflict' between statutes issue. 468, 1890 Radzanower Touche Ross & 426 148, 154, 96 1989, 1993, 540 (1976)). 25 district shall equity actions chapter thereunder." one day challenge legality transaction. maintained nothing "remotely expresses congressional 97-98, 416. 26 litigants court—whether sui ng individuals —from prohibits adjudicating prohibit exercised jurisdiction, i.e., concurrent example, "brought enforce" obligations power asserting action7 and, agreed settle, Due Process Clause. trespassed territory courts, merely nonexclusive Abramson Pennwood Investment 392 759, 762 1968) ("Although adjudicate powers corporation approve condition true assessed worth assessment amount 461 1982) (" 'Approval call findings compromised. likelihood success failure; controversy determined' ") Haudek, Dismissal Stockholders' Actions-Part II: Sw.L.J. 765, 809 (1969) (footnotes omitted)). purported resolve appraising settlement; indeed, expressly disavowed purpose. 11740, 43024 68a ("In approved, try principle seem especially appropriate outside Court" legislative elucidates enacting 27. Murphy Gallagher, 761 885 1985) (noting readily apparent explanation provision 27) (citing L. Loss, Regulation 997, 2005 (2d ed.1961)). presume, most grants jurisdiction: "to law." 885. policies. danger judges fully say definitively what means legal liabilities duties And uniform unaffected approv al evaluates overall applying business Polk Good, 507 531, 535 (Del.1986). Furthermore, contemplated possibility dual transactions. 78bb(a) (preserving "all remedies exist equity"). chose about consequences ought obtain double recovery. said modify background rule precedes 29 Finally, may, various ways, affect running afoul jurisdictional question. Becher Contoure Laboratories, 279 388, 49 356, 73 L.Ed. 752 (1929) (cited 1332), patent recognition logical establishing [the law] Becher's void." 391, 357. reasoned although "decrees validating invalidating patents belong Courts States," "does sacrosanctity conclusive issue." Similarly, determinations only, sacred agree 139, 10, 2213, "[i]f, question, using standards 17, estoppel, countervailing policy, court"); Pratt Paris Gaslight Coke 168 255, 258, 62, 63, 42 458 (1897) (when subject complaint, defense). 30 resolved Shearson/American Express McMahon, 482 220, 107 2332, 185 (1987), tried arbitrate 227-228, 2337-2338. It follows able waive, "release," forum agreement. demonstrates, conferring require resolution 31 Taken together, stand proposition "universa l 420. wish preserve absolutely object fact, They unimpeded 32 end, §§ "do pose either-or proposition." Connecticut Nat. Germain, 503 249, 253, 112 1146, 1149, 117 391 (1992). reconciled reading mandate incorporating settlements, itself, exercising C. Wright, A. Miller, E. Cooper, Practice 4470 pp. 688-689 (1981) ("[S]ettlement defeat rulings surely correct"). Congress' provide enough. override "principles comity repose embodied 463, 1888, allowing them further, C 33 engage Rather, ground parties, required. F.3d, 661, 666. Underwriters Assurance North Carolina Life Accident Health Ins. Guaranty Assn., 455 691, 704-705, 1357, 1366, 71 558 '[A] pass merits—had render judgment' Durfee Duke, 375 106, 110, 242, 244, 186 (1963)). applies acted bounds 661-662, 25. 34 explained above, possessed Only so—for instance, claims—would lack Where, inapposite. relevance possession per se, existence 1738.8 35 remanded consistent opinion. 36 37 ordered. 38 39 I join II-C opinion, reasons concluding II-B GINSBURG addressed remains free consider litigated adequacy representation. 40 whom STEVENS joins, SOUTER joins II-B, 41 extent remands remand attend controlling endeavor, does, speak word content practice remitting 387, 1335, (1985). write separately emphasize point key 1738: unless satisfies Fourteenth Amendment's 482-483, 1898-1899. setting, among ingredients supplied bind members. 808, 2972, (1985); 923-924 (Del.1994). 43 Suitors (called "Epstein plaintiffs" opinion), argued again represented representatives. contend representatives' willingness meager return members, solid fee attorneys, disserved particularly, absentees. inadequacy apparent, maintained, sub judice proper claims—the judiciary. Although reaching check obligation, open remand. ante, __, "w[as] basis below," "need [it]"). 44 prompted brief account facilitate comprehension plaintiffs' position. September 26, response reports financial press negotiating buy Delaware, stockholders MCA. Naming (but Matsushita) defendants, only. carry market value change control, Revlon, MacAndrews Forbes Holdings, 506 173, 182 For duty, sought, injunction 45 announced November 1990. offered $71 share, tendered shares December 29, owners 91% January 3, 1991, price $6.1 billion, acquired 46 few days filings disclosed Central California.1 Based complaints defendant, 14d-10, CFR 240.14d-10 10b-13, 240.10b-13 offering preferential treatment principals Lew Wasserman Sidney Sheinberg. public special tax-driven swap arrangement Wasserman, chairman chief executive officer, $21 bonus Sheinberg, operating officer owner 1,170,000 arrangements violated, SEC's "all-holder best-price" (Rule 14d-10), bidders equal terms. fell certification offer. 47 later, counsel advised amend include add defendant. wasted increasing corporation's exposure violation 10b-13 disclosure benefits insiders takeover, Sheinberg breached deals Matsushita. alleged, conspired aided abetted Within days, submitted proposal Vice Chancellor. "poison pill" charter subsidiary,2 fees payment $1 counsel. Chancellor April reasons: monetary benefit members; potential release. "generous payment" fees, observed, "confer[red] 695 (Del.Ch.1991). revised poison pill "illusionary[,] apparently offers real 696. described "at best, extremely weak therefore, [of] little value." 694. "[T]he substantial merit," he "are action." rejection lawsuit lay dormant year. proceeded. rulings, denied motion certification, dismissing 15, 1992, 51 October cents share costs. $691,000 fees. relief, laws, otherwise) [tender offer] Actions. ." 187-188. Unlike proposal, opt-out provision. 52 He "it settle meager." 43024, *1 (Del.Ch., Feb.16, 1993). members' recovery "adequate (if barely so) support settlement." *4. reasoned, having "now minimal economic gave weight presence 53 Addressing objectors' contention "collusive," recalled ha[d] patently inadequate settlement," "suspicions abound." *5. Nevertheless, noted, "[o]bjectors evide nce collusion," reject ground. Reducing $250,000, observation: defendants' seems likely motivated much concern characterized 'extremely weak.' *6. order, affirmed "on assigned 126,1993, 385041, (Sept. 21, judgt. reported 370. 54 Before disagreed. Relying circuit decisions,3 plenary effectively extinguish rest "identical predicate," concluded, subsume enough, Circuit's view, discrete stem "same transaction," urged. 661-665. turn operative pleaded found; accordingly, issue-preclusive led declare decree "exceed[ed] credit." 55 merits, private redress 14d-10 violations. 652. paying shareholders, 657; reversing disposition determination damages, Regarding vacated encourage his shares. 659. instruction, indicates, asked recognize 466, 1889; evaluate through lens determination. 386-387, 1335; 87, 899, ("Prudence interpret Ohio it.").4 57 Every preclusiveness pervasively affected supreme land. To rendition forum, nationally, measure up "A constitutionally infirm 482, 1898 (footnote 58 listed procedural money meet absentees; notice, heard, out, 2974. Clause members." Hansberry Lee, 311 32, 42-43, 45, 61 115, 118-119, 120, 85 (1940)). Shutts phrase times" representative's continuing one. 2974; Gonzales Cassidy, 67, 75 (C.A.5 1973) (representative's failure initially inadequate, class). 59 emphasizing constitutional significance requirement, line responsibility states themselves assuring essentials met. Hansberry, 42, 118.5 judgments, remain vulnerable attack satisfy 40, 117, 118; Restatement (Second) Judgments 42(1)(d) (e), Comments e f, 406, 410-412 (noting, purportedly person where, knowledge opposing party, representative seeks advance interest expense person); 41, Comment a, 394 exist, avoid being appearing attacking proceedings"). (Emphasis added.) conducting predetermine judgment; tested 7B M. Kane, 1789, 245 ed.1986). Chancery's counterpart. Prezant, 923, 920. requires, prerequisite "fairly protect class." Del. Ch. 23(a)(4). sine qua non concluded was. 920, 926. high overturned explicit underscored demands opt-out; representation, too, emphasized, essential ingredient. 924 2974). Notice, substitute thorough examination negotiation pursue. 924. infrequently utilized usually economically impracticable." 62 Chancellor's evaluation bridge gap, "taint[s]" entire 925.6 "[A]n representative," explained, "vigorously conflict bargaining arms-length, different representative." Consequently, record propriety according requisites 23(a) (b)." 63 arguing 923.7 left unresolved questions: notably, vigorously settlement.8 representatives—who months announcement—actually December, thereby enabling undervalued claims—claims litigate, improperly shifted burden proof;9 charges "collusion" want evidence acknowledging [of collusion] *5.10 64 Mindful review contentions, counterargument Chancery.11 arguments airing stress, centrality protection lawsuits, emphatically J. Coffee, Suspect Settlements N.Y.L.J., March 28, 5, col. 1. syllabus constitutes prepared Reporter Decisions convenience reader. Detroit Lumber 200 321, 337, 282, 287, 499. cause 14(d)(6) (7) 78n(d)(6) (7), 14d-10. previous unfair 687 (1991). Compare below Grimes Vitalink Communications 1553 (C.A.3), 513 480, 130 393 (1994); Trans-Lux 925 (C.A.1 1991); 759 1968). contained provision, precisely believed pursuing 692 (1991) ("[I]f transaction, Objectors forever barred"). discussion inadequately represented. 34-45. spite ruling, following issue, 923 (Del.1994) ("[The] representation] [Delaware] 23(a)(4), 'fairly class' "). need Yee Escondido, 519, 533, 1522, 1531, 118 153 respondent defend alternative grounds, below. Peralta Heights Medical Center, 485 86, 108 (1988). argue constitute traditional contract principles. 16-25. Again, respondents—whether distinguished law—is certiorari. note, chooses embodying pure adhere 1897-1898, premised allegation pled nonetheless duty. Kalb Feuerstein, 433, 343, (1940), contrary. prohibited instituted 440-441, 346-347. entertaining foreclosure otherwise situation just sets California: (including Lawrence Epstein, John Linder, Jane Rockford, Maurice Karlin, Ruth Beth Bert Karlin) sued offer; Walter Minton individual capacity. price. consolidated cases. appears, Rockford qualification individuals, Delaware. Petitioners ii. initiative subsidiary spun off during merger owned television station acquiring. $5 new Closest point, (C.A.3 1994), 1991). 662 1995). endeavor forecast blended predicate" applied 1089, 1106-1107 (1989), broader transaction" advanced Many States, corresponding ranking maintaining Newberg Conte, 13-1 (3d ed.1992) (listing Columbia comparable 23); Fed. Civ. Proc. 23(a)(4) (representatives sue class"); General Telephone Southwest Falcon, 457 147, 157-158, 13, 2364, 2370-2371, 740 (Federal 23(a)(4)'s "raises competency conflicts interest," members). temporary device used, telescoping According near simultaneity relieve her demonstrate, determine, 923. Third examining context 23. Motors Corp. Pick-Up Truck Fuel Tank Products Liability 794-800 year approved. largely reiterated almost decade earlier Balotti Finkelstein, Law Corporations Business Organization 13.22, 13-131, 578 ed. Supp.). purposes, urge, representatives, 198, boilerplate referring 204-205. paragraph order. place proof supra 6, 13-17, 13-121 (class prove satisfaction representation); 7A 1765, 273-274, ed.1986); 3B Moore, Moore's 23.02-2 ed.1995). regard, noteworthy move dismiss Chancellor, rejecting surveyed insubstantial. 694 (Vice claims" weak" "little value"). Counsel acknowledged relief counterpart 60(b). Tr. Oral Arg. 51-52; 60; 4, 11.27, 11.63 60(b) avenue settlement).

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