Opinion ID: 73212
Heading Depth: 2
Heading Rank: 2

Heading: The 1992 National Class Action

Text: Before discussing the district court's resolution of the claim preclusion issue, it is useful to set out the underlying facts of the prior class action. In 1992 the California Department of Consumer Affairs, Bureau of Auto Repair (BAR) released the results of an eighteen-month investigation into the practices of Sears Tire and Auto Centers. BAR concluded in the report that Sears Tire and Auto Centers habitually overcharged customers for auto repairs, recommended 2 unnecessary repairs, and charged for repairs that were never in fact completed. The heavily publicized results of BAR's investigation prompted the filing of a number of class actions against Sears both in California and in other states, alleging various consumer fraud and deceptive trade practice claims. These cases ultimately were consolidated into a single class action (the 1992 National Class Action) in the United States District Court for the Northern District of California styled In re Sears Automotive Center Consumer Litigation, No. C-92-2227-RHS. The suit focused on Sears's compensation policy, which based employees' compensation on the number of auto services they completed within a given period and set quotas for certain high-profit-margin automotive repairs. The complaint alleged that the commission-and-quota compensation system encouraged Sears personnel to recommend and perform unnecessary services, to perform services in a hasty, slipshod manner, or to charge for services that were never in fact performed. (See R.1-16 Ex. 2-A (Second Amended Class Complaint—1992 National Class Action).) The parties reached a settlement, and in September 1992 the district court provisionally certified a mandatory settlement class under FED. R. CIV. P. 23(b)(1) and 23(b)(2) and appointed settlement class representatives and counsel. The court also granted preliminary approval of the proposed settlement pending a final settlement approval hearing, and approved dissemination of a Notice of Proposed Settlement by publication in newspapers nationwide. The district court held a final settlement approval hearing, and in October 1992 entered an order finally certifying the class as an opt-out class under FED.R.CIV.P. 23(b)(3) and approving a settlement in the action. The settlement provided compensatory relief in the form of $50 coupons issued by Sears to class members who purchased and had installed at a Sears Auto Center a pair of brake calipers, a pair of coil springs, a pair of shock absorbers, a master cylinder, or an idler arm. (See R.1-16, Ex. 3 3-A, Settlement Agreement at 9-10.) The settlement also contractually obligated Sears, pursuant to its Satisfaction Guaranteed or Your Money Back policy, to review any complaints or concerns that any customer presents to it that unnecessary service was performed, or that services were incorrectly performed, by a Sears Auto Center, and to take corrective action for members of the Plaintiff Settlement Class consistent with the policy if appropriate. (Id. at 8-9.) Sears also agreed to re-communicate to all service employees in its Auto Centers its firm policy that none of its employees should recommend unnecessary auto repairs. (Id. at 7.) Class counsel received $3,000,000 in fees and costs, plus interest. (See id. at 16-17.) The parties formulated a plan of distribution by which a final notice of settlement,1 including a proviso that settlement class members could opt out of the settlement if they wished, would be published nationwide in major newspapers and posted in Sears stores. The district court approved the parties' plan. C. The District Court's Ruling on Sears's Motion for Summary Judgment In determining whether the 1992 National Class Action barred Twigg's claims, the district court started from the well-established proposition that there are four elements to claim preclusion: (1) a final judgment on the merits; (2) rendered by a court of competent jurisdiction; (3) identity of parties; and (4) identity of causes of action. See, e.g., Kemp v. Birmingham News Co., 608 F.2d 1049, 1052 (5th Cir.1979). The parties did not dispute that a court of competent jurisdiction had rendered a final judgment in the 1992 National Class Action, which left only identity of parties and identity of causes of action to be adjudicated. With respect to identity of parties, the central point 1 Both the preliminary and final notices are included in their entirety as appendices to this opinion. 4 of contention was the meaning of automobile repairs as used in the Northern District of California's order defining the class as persons or entities who purchased any automobile repairs (including both the parts and the labor) from any Sears Auto Center from June 10, 1988 through September 2, 1992. (R.1-16, Ex. 3-A at 3.) Twigg argued that the AccuBalance service does not constitute automobile repairs, and thus he was not a member of the class in the 1992 action. The district court observed that the settlement agreement was governed by California law, and turned to a California regulatory statute defining repair of motor vehicles. Based on its reading of that statute, the district court concluded that the AccuBalance service constitutes automobile repairs, and that Twigg was a class member in the earlier action. In determining whether the causes of action were identical, the district court turned to our decision in Manning v. City of Auburn, 953 F.2d 1355 (11th Cir.1992), which held that a determination of whether the causes of action in two proceedings are the same is governed by whether the primary right and duty are the same, and that claim preclusion applies not only to the precise legal theory presented in the previous litigation, but to all legal theories and claims arising out of the same operative nucleus of fact. Id. at 1358 (quotations omitted). In support of its contention that Twigg's claims arose out of the same operative nucleus of fact, Sears pointed to two items: (1) the complaint in the 1992 National Class Action, which alleged, inter alia, that Sears charged for services that were never performed; and (2) the BAR investigation, which included the investigation of tire services and precipitated the 1992 National Class Action. The district court, finding these contentions persuasive, concluded that Twigg's claims arose from the same operative nucleus of fact as the claims in the 1992 National Class Action for purposes of claim preclusion. Having found the elements of claim preclusion to be present, the district court granted Sears's 5 motion for summary judgment on claim preclusion grounds; the court did not explicitly address Twigg's due process arguments. Twigg appeals. After the summary judgment ruling, Sears entered into an agreement to settle a suit brought by the Attorney General of Florida concerning Sears's nonperformance of AccuBalance services in Florida between 1989 and 1993. Twigg learned of this settlement, and filed a Rule 60(b) motion for relief from judgment on the ground of newly discovered evidence, arguing that Sears's settlement of claims for the nonperformance of AccuBalance services from 1989 to 1993 constituted newly discovered evidence that the 1992 National Class Action did not encompass AccuBalance services. The district court denied this motion on the ground that the 1997 settlement could not be newly discovered evidence sufficient to justify modification of the judgment under FED.R.CIV.P. 60(b), as it was not in existence at the time of the summary judgment order. Twigg appeals this ruling as well; the appeal was consolidated with his appeal of the summary judgment order, and the two are now before us.