Opinion ID: 868479
Heading Depth: 3
Heading Rank: 1

Heading: Res Judicata and Due Process

Text: Guedalia argues that the District Court erred by dismissing his and the putative class’s claims as barred by res judicata, and that he is entitled to collaterally attack the Settlement Agreement. He claims that he and the putative class are not bound by the Settlement Agreement because they were denied due process in the resolution of the Collado-Fixler action as a result of inadequate representation.7 It is well-settled that under the doctrine of res judicata, “a judgment pursuant to a class settlement can bar later claims based on the allegations underlying the claims in the settled class action.” In re Prudential Ins. Co. of Am. Sales Practice Litig., 261 F.3d 355, 6 The District Court dismissed Gotthelf’s claims without prejudice, and granted him leave to file an amended complaint. When Gotthelf failed to file an amended complaint, the District Court ordered his claims dismissed with prejudice. 7 Because Gotthelf opted out of the class settlement, he is not bound by the Settlement Agreement and therefore cannot collaterally attack it. 8 366 (3d Cir. 2001). To be bound by a class settlement agreement under the principles of res judicata, however, the absent class member must have been afforded certain due process protections. In re Diet Drugs Prods. Liab. Litig., 431 F.3d 141, 145 (3d Cir. 2005).8 Generally, “‘there has been a failure of due process only in those cases where it cannot be said that the procedure adopted, fairly insures the protection of the interests of absent parties who are to be bound by it.’” Id. (quoting Hansberry v. Lee, 311 U.S. 32, 42 (1940)). In a class action settlement where opt-out rights are given, due process requires: (1) adequate representation by the class representatives, (2) notice of the class proceedings, and (3) the opportunity to be heard and to participate in the class proceedings. Id. (citing Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811-12 (1985)). Therefore, if the settlement of the Collado-Fixler action comported with due process, res judicata will apply to bar Guedalia’s and the putative class’s claims. An absent class member must have some mechanism by which to challenge whether his due process rights were upheld during a class action settlement. See Grimes v. Vitalink Commc’ns Corp., 17 F.3d 1553, 1558 (3d Cir. 1994). “This challenge can take the form of an appeal of the class certification itself, a collateral attack on an already-certified class, or a Rule 60(b) motion.” In re Diet Drugs, 431 F.3d at 145 (citing In re Real Estate Title & Settlement Servs. Antitrust Litig., 869 F.2d 760, 767 (3d Cir. 8 The Parties do not dispute that all the elements of res judicata are met here, and Guedalia concedes that those elements are “not the important issue.” (Appellants’ Br. 19.) The contested issue is whether the procedures afforded to Guedalia and the putative class in the Collado-Fixler action comported with due process. 9 1989)). Guedalia has chosen to collaterally attack the California District Court’s class certification and approval of the Settlement Agreement, rather than to pursue a direct appeal.9
Guedalia does not, and cannot, challenge that class members were provided with sufficient notice and had ample opportunity to be heard and to participate in the class proceedings. Guedalia clearly was apprised of the terms of the settlement, decided not to opt out, and exercised his right to object to the class certification and Settlement Agreement. See In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 791 (3d Cir. 1995) (explaining that when simultaneous notice of the class and the settlement is distributed to the proposed class, class members may object to both the terms of the proposed settlement and the class certification itself). Moreover, the District Court considered his specific objections before approving the Settlement Agreement. Guedalia’s only due process objection relates to the adequacy of representation. See Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 396 (1996) (Ginsburg, J., concurring in part and dissenting in part) (“Final judgments, however, 9 Guedalia could have appealed the California District Court’s approval of the Settlement Agreement under Devlin v. Scardelletti, 536 U.S. 1, 14 (2002), which holds that an unnamed class member who timely objects to a settlement agreement has standing to appeal the approval of the settlement agreement. 10 remain vulnerable to collateral attack for failure to satisfy the adequate representation requirement.”).10
The adequate representation requirement in Rule 23 is designed to assure that courts “‘evaluate [both] the named plaintiffs’ and . . . counsel’s ability to fairly and adequately represent class interests.’” In re Cmty. Bank of N. Va., 622 F.3d 275, 291 (3d Cir. 2010) (quoting In re Gen. Motors, 55 F.3d at 799). Under Fed. R. Civ. P. 23(a)(4), the district court ensures that no conflict of interest exists between the named plaintiffs’ claims and those asserted on behalf of the class, and inquires whether the named 10 Because Guedalia received notice of the proceedings and failed to exercise an opportunity to “opt out,” he consented to the jurisdiction of the California District Court, and is bound by the terms of the Settlement Agreement if he received adequate due process protections. See In re Diet Drugs, 431 F.3d at 146 (citing Carlough v. Amchem Prods., Inc., 10 F.3d 189 (3d Cir. 1993)). 11 To the extent Guedalia’s challenge could be read as asserting a constitutional right to effective or adequate counsel in a class action case, this claim is rejected. Supreme Court precedent firmly establishes there is no Due Process right to counsel unless the individual may be incarcerated as a result of the litigation. See, e.g., Lassiter v. Dep’t of Soc. Servs., 452 U.S. 18, 25 (1981); but see Rodriguez v. West Publ’g Corp., 563 F.3d 948, 959 (2d Cir. 2009) (“An absence of material conflicts of interest between the named plaintiffs and their counsel with other class members is central to adequacy and, in turn, to due process for absent members of the class.”). In fact, even when there is a possibility that a litigant may lose his liberty at the close of the proceeding, the “Due Process Clause does not automatically require the provision of counsel.” Turner v. Rogers, 131 S. Ct. 2507, 2520 (2011) (emphasis in original). This is not inconsistent with our class action collateral attack jurisprudence, in which collateral challenges based on “adequacy” generally focus on the adequacy of the class plaintiffs, rather than class counsel. See In re Diet Drugs, 431 F.3d at 145 (due process satisfied by “adequate representation by the class representatives, notice of the class proceedings, and the opportunity to be heard and participate in the class proceedings”); accord id. at 147-49 (reviewing due process and adequate representation challenges based on intraclass conflicts). 11 plaintiffs have the ability and incentive to vigorously represent the interests of the class. See id. “‘Although questions concerning the adequacy of class counsel were traditionally analyzed under the aegis of the adequate representation requirement of Rule 23(a)(4) . . . those questions have, since 2003, been governed by Rule 23(g).’” Id. at 292 (quoting Sheinberg v. Sorensen, 606 F.3d 130, 132 (3d Cir. 2010)). Rule 23(g) lists several factors that district courts consider to determine whether class counsel can “fairly and adequately represent the interests of the class.” Fed. R. Civ. P. 23(g)(1)(B). The list includes: (1) “the work counsel has done in identifying or investigating potential claims in the action;” (2) “counsel’s experience in handling class actions, other complex litigation, and the types of claims asserted in the action;” (3) “counsel’s knowledge of the applicable law;” and (4) “the resources that counsel will commit to representing the class.” Fed. R. Civ. P. 23(g)(1)(A). Guedalia has identified no “divergent or conflicting interests” between the named plaintiffs and the putative class. In re Cmty. Bank, 622 F.3d at 291. All plaintiffs and class members were owners or lessees of model years 2006-2009 Toyota Priuses who experienced the same malfunction with their HID headlamp system. Guedalia’s claims of inadequate representation focus mainly on the adequacy of representation by class counsel and are two-fold. First, he argues that class counsel was deficient for failing to conduct adequate discovery before settling the Collado-Fixler action. Second, he argues that the “unfair, unreasonable, and inadequate” Settlement Agreement supports a claim of 12 inadequate representation, and demonstrates that the named plaintiffs and class counsel did not vigorously represent the interests of the class. a. Guedalia’s Challenge to the Adequacy of Discovery Guedalia’s claim of inadequate representation for failure to conduct sufficient discovery fails because the issue was presented to, and resolved by, the California District Court. As we explained in In re Diet Drugs, No collateral review is available when class members have had a full and fair hearing and have generally had their procedural rights protected during the approval of the Settlement Agreement. Collateral review is only available when class members are raising an issue that was not properly considered by the District Court at an earlier stage in the litigation. 431 F.3d at 146. Guedalia raised the same issue regarding the adequacy of discovery in his objection to the Settlement Agreement. He argued that discovery in the ColladoFixler action had only occurred for two months, was limited to discovery relating to class certification, and that therefore, any settlement was premature and inappropriate. In its Final Approval of Settlement, issued after the fairness hearing, the California District Court considered the arguments raised by the objectors and rejected them. The court explained: Some discovery has taken place, the parties have propounded and responded to interrogatories, and Plaintiffs’ counsel appear to have a firm grasp on the strengths and weaknesses of the case. Given counsel’s substantial experience with class action settlements and opinion that the settlement is in the best interest of the class, the Court likewise agrees. (App. 596.) The California District Court also considered the costs of additional discovery and litigation, and determined that “[t]he potential costs of continuing the 13 lawsuit could greatly overshadow any judgment Plaintiffs may be able to recover.” (Id.)12 Because the extent of discovery conducted was “properly considered by the District Court at an earlier stage in the litigation,” we will not revisit that issue on collateral review. See In re Diet Drugs, 431 F.3d at 146. b. Guedalia’s Challenge to the Fairness of the Settlement Agreement Guedalia also argues that the settlement was “[u]nfair, inadequate, and unreasonable,” which he claims is clear evidence that the named plaintiffs and class counsel “failed to prosecute the action with due diligence and reasonable prudence.” (Appelants’ Br. 31.) Because Guedalia’s challenge takes the form of a collateral attack, our scope of review is more circumscribed than it would be on direct appeal. The California District Court’s order approving the Settlement Agreement is now final and unappealable, and therefore “[a]ny challenges to the [substance] of the [S]ettlement [A]greement itself . . . are no longer timely.” Orthopedic Bone Screw Prods. Liab. Litig., 350 F.3d 360, 363 (3d Cir. 2003). Guedalia, under the guise of “adequate representation,” is attempting to challenge “the terms of [the] settlement agreement, itself,” which “is clearly inappropriate as it is 12 We considered a similar argument in In re Prudential Insurance Co. America Sales Practices Litigation Agent Actions, 148 F.3d 283, 312 (3d Cir. 1998). There, an objecting plaintiff argued (albeit on direct appeal) that class counsel did not adequately represent the interests of the class for failing to take sufficient discovery before entering into a settlement agreement. We found that class counsel adequately represented the class and determined that avoiding “expensive and time consuming discovery” was a factor that weighed in favor of settling. Id. at 313, 318. 14 not a component of a due process challenge, appropriate for collateral attack.” In re Diet Drugs, 431 F.3d at 146, 149. Had Guedalia wished to challenge the fairness, adequacy, and reasonableness of the Settlement Agreement, he could have appealed the ColladoFixler action to the Ninth Circuit. He chose not to do so, and this Court is not the appropriate forum in which to litigate those claims.13 Guedalia has not identified a conflict of interest between the named plaintiffs and the rest of the class and has not demonstrated that class counsel was unable to adequately represent the interests of the class. He accordingly has not demonstrated a violation of the absent class members’ due process rights, and he and the putative class are bound by the Settlement Agreement under the principles of res judicata. 13 Guedalia’s claim relating to the California District Court’s failure to conduct a choice of law analysis also lacks merit. Choice of law is not one of the due process considerations we take into account on collateral review of a settlement agreement. See In re Diet Drugs, 431 F.3d at 145 (listing out the three factors — notice, opportunity to be heard, and adequate representation — courts analyze to determine whether absent plaintiffs received adequate due process). Moreover, in In re Warfarin Sodium Antitrust Litigation, we explained that although variations in state laws can present difficulties in certifying a litigation class under Rule 23(a), “those variations are irrelevant to [the] certification of a settlement class.” 391 F.3d 516, 529 (3d Cir. 2004) (emphasis added). This is so because unless the differences in state laws are “so significant so as to defeat commonality and predominance,” choice of law never becomes an issue in certifying a settlement class. Id. at 529-30. Guedalia has made no showing, and did not argue before the California District Court, that significant variations between California and New Jersey law defeated commonality and predominance. 15