In the concluding chapter of a long-running class action saga, on May 1, 2012, the Seventh Circuit vacated its order enjoining putative class members in Thorogood v. Sears, Roebuck & Co., Nos. 10-2407 & 11-2133 (7th Cir. May 1, 2012) (“Thorogood IV”), from trying to certify copy-cat class actions in other courts around the country.
In previous posts (here and here), we reviewed the complicated history that led to the Seventh Circuit’s fourth pass on class counsel’s “crusade” against the Sears stainless steel clothes dryer. On November 2, 2010, following its decision to decertify Thorogood’s proposed class, the Seventh Circuit issued an order directing the district court to enjoin all putative plaintiffs in that case from pursuing similar claims on a class basis. Thorogood v. Sears, Roebuck & Co., Case No. 10-2407 (7th Cir. Nov. 2, 2010) (“Thorogood III”).
On May 1, 2012, in the wake of the Supreme Court’s decision in Smith v. Bayer Corp., 131 S. Ct. 2368 (2011) (previously discussed here), the Seventh Circuit reluctantly vacated its order, effectively allowing the other 500,000 members of Thorogood’s decertified class to try their luck with copycat suits in other courts.
Thorogood IV is a case study on the circumstances in which finality can be achieved in dismissing class claims.
Thorogood brought suit claiming that Sears misrepresented the “stainless steel” composition of its clothes dryer when it advertised the dryer as having a “stainless steel” drum. Thorogood IV, at 4. Thorogood claimed that he understood this to mean that Sears made the drum entirely of stainless steel, but part of the front of the drum in fact was comprised of a ceramic coated “mild” steel, which rusted and stained his cloths. Id. at 4. Judge Leinenweber of the U.S. District Court for the Northern District of Illinois certified a class, but the Seventh Circuit reversed, finding it “inconceivable that all or even many of the proposed class members had the same understanding of Sears’ advertising.” Id. at 4-5. The Seventh Circuit held that “there would be no economies from allowing his suit to be litigated as a class action because there would be no issues that could be resolved in a single, class-wide evidentiary hearing.” Id. at 6. On remand, Sears made an offer of judgment that covered Thorogood’s individual damages and mooted the case. Id.
Subsequently, Murray filed another suit in California state court, and Sears removed the case to federal district court in California. Murray had been a member of Thorogood’s proposed class and was represented by the same counsel who had represented Thorogood. Id. at 2. Sears asked Judge Leinenweber to enjoin the California suit based on the All Writs Act, 28 U.S.C. § 1651(a), which empowers federal courts to issue commands necessary or appropriate to effectuate and prevent the frustration of their orders. Id. at 3. Although the district court denied the motion, the Seventh Circuit again reversed and ordered the district court to issue an injunction not only against Murray but also against the other members of Thorogood’s decertified class “so that additional Murrays wouldn’t start popping up, class action complaint in hand, all over the country.” Id. at 8.
The Supreme Court granted certiorari, vacated the decision, and remanded the case for reconsideration in light of Smith v. Bayer Corp., 131 S. Ct. 2368 (2011), rendered after the Seventh Circuit’s decision in Thorogood III. In Smith, the Supreme Court considered whether a district court could enjoin a litigant from seeking class certification in state court after a federal district court had denied certification of a similar class under federal rules that differed from state class action rules. Thorogood IV, at 9. In its ruling, the Supreme Court answered the question in the negative and held that “neither a proposed class action nor a rejected class action may bind nonparties.” Id. at 10 (quoting Smith, 131 S. Ct. at 2380).
The Seventh Circuit’s Opinion
In a ruling authored by Judge Posner, the Seventh Circuit concluded that, because it had decertified Thorogood’s class, Murray never became a party to Thorogood’s suit. Under Supreme Court precedent, being neither a party nor in privity with one, he could not be bound by the judgment. Id. at 10. Judge Posner reasoned that, had the district judge (as he should have) refused to certify the class, there would be no argument that Murray had been a party to the suit and therefore no obstacle to Murray’s filing his own class action – “and it would be odd if by virtue of a mistaken ruling by the district judge Murray is barred.” Id. at 11. Further, during the interval in which a class existed, Thorogood did not notify the class members, including Murray, of its pendency so Murray did not have the opportunity to opt out. The Seventh Circuit reasoned that as he was “[d]enied the opportunity to opt out, he was not bound by our ruling and is therefore free to file his own class action against Sears.” Id. at 11.
Judge Posner noted that the Supreme Court could have changed the rule of non-party preclusion but instead decided to stick with it and list alternatives, such as stare decisis, comity, and consolidation of overlapping suits by the Panel on Multidistrict Litigation, for parties seeking relief from copy-cat claims. Judge Posner noted that Sears would have to tread one or more of these paths to obtain relief from Murray’s and perhaps other plaintiffs’ copy-cat actions – “we can’t save it.” Id. at 12.
With the Seventh Circuit’s decision to vacate its injunction in Thorogood IV, defendants involved in class action litigation lost a powerful precedent to prevent copy-cat actions. Under Thorogood IV, putative class members, having lost motions for certification in one district, seemingly now may try their luck in other jurisdictions free of the constraints of the All Writs Act. It remains to be seen whether the other options suggested by the Seventh Circuit will gain traction, particularly if – as in Murray’s case – courts in subsequent forums have a different take on the viability of the class actions.