Opinion ID: 2834098
Heading Depth: 2
Heading Rank: 4

Heading: Effects on Certification

Text: The different procedural posture of the Cooper case raises another important issue. There the Court was faced with an interlocutory appeal of the actual subsequent claims being asserted, as opposed to this case in which we are asked to predetermine the preclusive effect of claims that may or may not be asserted in later litigation. In the only other case in which the United States Supreme Court has addressed res judicata in the class action context, a dissenting justice noted that “[a] court conducting an action cannot predetermine the res judicata effect of the judgment; that effect can be tested only in a subsequent action.” Matsushita Elec. Indus. Co. v. Epstein , 516 U.S. 367, 396 (1996) (Ginsburg, J., concurring in part and dissenting in part) (citing 7B Charles Alan Wright et al ., Federal Practice and Procedure § 1789 (2d ed. 1986)). We generally agree with this maxim, but hasten to address a due process concern that this temporal distinction may raise. Some courts have applied the principles of res judicata, but refused to hold that subsequent claims would be precluded due to a lack of adequate notice to class members regarding the claims being litigated in the class action. See, e.g. , Wright v. Collins , 766 F.2d 841,847 (4th Cir. 1989) (no preclusion because no notice); Aspinall v. Phillip Morris Cos. , 813 N.E.2d 476, 488-89 n.19 (Mass. 2004) (allowing member of class certified on economic damages theory to pursue individual claim for personal injury not suitable for certification in part because no “opt-out” provisions in state rules). The same reasoning has been the basis for court holdings that mandatory class actions for injunctive relief certified under Federal Rule of Civil Procedure 23(b)(2) cannot preclude subsequent individual claims for damages, even if based on the same events. See Hiser v. Franklin, 94 F.3d 1287, 1291 (9th Cir. 1996); Fortner v. Thomas , 983 F.2d 1024, 1031 (11th Cir. 1993); Brown v. Ticor Title Insurance Co. , 982 F.2d 386 (9th Cir. 1992); Norris v. Slothouber, 718 F.2d 1116, 1117 (D.C. Cir. 1983); Johnson v. Gen. Motors Corp., 598 F.2d 432, 437-38 (5th Cir. 1979) (finding that due process requires notice to absent class members before individual monetary damages could be barred and, though an absent class member could be bound by the res judicata effect of a Rule 23(b)(2) class action judgment as to injunctive or declaratory relief, he could not be barred from pursuing his individual monetary claim); Coleman v. Gen. Motors Acceptance Corp. , 220 F.R.D. 64, 80-84 (M.D. Tenn. 2004); In re Jackson Lockdown/MCO Cases, 568 F.Supp. 869, 888-89 (E.D. Mich. 1983); Jahn ex rel. Jahn v. ORCR, Inc. , 92 P.3d 984, 985 (Colo. 2004) (en banc). Although we are not faced here with a b(2) class, notice and due process still demand our attention. To have preclusive effect a prior judgment cannot be “constitutionally infirm.” Kremer v. Chem. Constr. Corp. , 456 U.S. 461, 482 (1982). Due process requires “that the named plaintiff at all times adequately represent the interests of the absent class members,” as well as “notice plus an opportunity to be heard and participate in the litigation.” Shutts, 472 U.S. at 812; see also Tex. R. Civ. P . 42(a)(4); Amchem Prods., Inc. v. Windsor , 521 U.S. 591, 625‑26 (1997). We noted as much in Compaq Computer Corp. v. Lapray , where we stated that due process may require that class members be given notice of the class action and an opportunity to opt out and preserve claims that a class representative has abandoned. 135 S.W.3d 657, 668 (Tex. 2004); see also Gen. Motors Corp. v. Bloyed , 916 S.W.2d 949, 953 (Tex. 1996) (“The United States Supreme Court has made it clear that due process requires adequate representation of the interests of absentee class members that the judgment will bind.”). Although a certifying court cannot precisely predetermine the res judicata effect of a class action, it initially must protect the due process rights of absent class members by ensuring that the class representative adequately represents their interests. See Epstein v. MCA, Inc. , 179 F.3d 641, 648 (9th Cir. 1999) (“[A]bsent class members’ due process right to adequate representation is protected not by collateral review, but by the certifying court initially, and thereafter by appeal within the state system and by direct review in the United States Supreme Court.”). Some courts have reconciled the tension between the trial court’s inability to predetermine res judicata and its burden to protect class members’ due process rights by requiring the trial court to assess the “risk” that uncertified claims may be forever barred. See Clark v. Experian Info. Solutions, Inc. , No. Civ. A. 8:001217-24, 2001 WL 1946329, at  (D.S.C. Mar. 19, 2001) (stating that offering only some claims for class certification when other, more lucrative claims could not be certified “defeats adequate representation since it places absent class members at the risk of having other claims forever barred by res judicata”); Zachery v. Texaco Exploration & Prod., Inc. , 185 F.R.D. 230, 243 (W.D. Tex. 1999) (assessing the risk of abandoned monetary claims that members of the b(2) pattern-and-practice class may face in trying to bring later individual claims); Thompson v. Am. Tobacco Co. , 189 F.R.D. 544, 550-51 (D. Minn. 1999) (refusing to certify because the “possible prejudice to class members” resulting from claim preclusion in the future “is simply too great”); Feinstein v. Firestone Tire & Rubber Co. , 535 F. Supp. 595, 606 (S.D.N.Y. 1982) (refusing to certify class action for economic losses where plaintiffs also had personal injury claims because of significant risks that class members would “later [be told] that they had impermissibly split a single cause of action”); Millett v. Atl. Richfield Co. , No. Civ. A. CV-98-555, 2000 WL 359979, at  (Me. Super. Ct. Mar. 2, 2000) (explaining that asserting claims for injunctive relief while leaving personal injury claims unraised places class members at risk of subsequent claim preclusion defense); Small v. Lorillard Tobacco Co., Inc. , 679 N.Y.S.2d 593, 601-02 (N.Y. App. Div. 1998) (stating that paring down class claims to avoid certification problems creates impermissible “risk” of adverse preclusive effect). We agree with this approach. A class representative’s decision to abandon certain claims may be detrimental to absent class members for whom those claims could be more lucrative or valuable, assuming those class members do not opt out of the class. Abandoning such claims, or claims “reasonably expected” to be raised by class members, could undermine the adequacy of the named plaintiff’s representation of the class. See City of San Jose v. Super. Ct. of Santa Clara County , 525 P.2d 701, 711-13 (Cal. 1974). But see Regions Bank v. Lee , 905 So.2d 765, 772-73 (Ala. 2004) (rejecting adequacy challenge based on effect of res judicata because abandoned claims would involve a different cause of action against a different defendant than that involved in the class action). We hold, therefore, that Texas Rule of Civil Procedure 42 requires the trial court, as part of its rigorous analysis, to consider the risk that a judgment in the class action may preclude subsequent litigation of claims not alleged, abandoned, or split from the class action. The trial court abuses its discretion if it fails to consider the preclusive effect of a judgment on abandoned claims, as res judicata could undermine the adequacy of representation requirement. See Wolff, 105 Colum. L. Rev at 722 (“[T]he preclusion inquiry would sometimes reveal significant obstacles to class certification . . . .”). A trial court could, however, determine that the risk of preclusion is not high enough to refuse certification. For instance, the abandoned claims may be insignificant, unlikely to succeed in any proceeding, or not valuable. Some abandoned claims may be alleged against different defendants or may not be ripe for litigation, in which case res judicata would not apply. But, because we hold class actions seeking damages to the same res judicata standards as other forms of litigation, including enforcing the preclusion on abandoned claims which could have been litigated in the suit, it is critical that putative class members be given adequate notice and an opportunity to exclude themselves from the class form of proceeding so that they may preserve individual claims that may otherwise be barred from subsequent litigation. See Richard A. Nagareda, Preexistence Principle and the Structure of the Class Action , 103 Colum. L. Rev. 149, 216 (2003) (contending that the ability to opt out respects the rights of class members to control their claims). [11] Under Rule 42, notice must be given to the class, and class members given an opportunity to opt out, before the trial court addresses the merits of the class claims. See Bally Total Fitness Corp. v. Jackson , 53 S.W.3d 352, 360 (Tex. 2001) (Owen, J. dissenting); see also Am. Pipe & Const. Co. v. Utah , 414 U.S. 537, 548 (1974) (explaining that Federal Rule of Civil Procedure 23 was amended to avoid “one‑way” intervention issue arising when class members were not identified before court made decisions going to merits). To properly protect absent class members, a trial court must rigorously analyze Texas Rule of Civil Procedure 42’s prerequisites prior to sending any necessary class notice, as this analysis will likely affect the class definition and requisites for the notice. McAllen Med. Center, Inc. v. Cortez , 66 S.W.3d 227, 232 (Tex. 2001). Rule 42 sets out the following requirements for notice in a b(3) class action: For any class certified under Rule 42(b)(3), the court must direct to class members the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice must concisely and clearly state in plain, easily understood language: (i) the nature of the action; (ii) the definition of the class certified; (iii) the class claims, issues, or defenses; (iv) that a class member may enter an appearance through counsel if the member so desires; (v) that the court will exclude from the class any member who requests exclusion, stating when and how members may elect to be excluded; and (vi) the binding effect of a class judgment on class members under Rule 42(c)(3). Tex. R. Civ. P. 42(c)(2)(B). Ultimately, to certify a class in which the representatives have abandoned claims in favor of pursuing certain class claims, raising a risk of preclusion for absent class members, effective notice must be given to these absent members of an identified class regarding the preclusive effect that may attach to their individual claims. The unnamed members may then exercise independent judgment and chose to remain in the class or opt out.