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Thursday, June 16, 2011

Court Lets State Court Suit Against Bayer Corp. Proceed

Today the Supreme Court heard Smith v. Bayer Corp. At stake was the ability of consumers unaware of pending class action lawsuits to raise additional issues in their own class action suits against corporate wrongdoers.

Bayco, a prescription drug manufactured by Bayer to reduce cholesterol, has killed an estimated 100 people and injured 1000 worldwide. Thirty-one of those deaths have occurred in the United States. Thousands of others suffered economic losses purchasing a dangerous drug that is now off the market.

Petitioners Keith Smith and Shirley Sperlazza were among those who suffered economic losses. They sought certification of a class of similarly situated West Virginia plaintiffs in state court under the West Virginia Rules of Civil Procedure. However, a federal district court judge in Minnesota that had previously denied certification of a similar class based on an analogous federal rule of civil procedure issued an injunction to block Smith and Sperlazza from seeking class certification. Smith and Sperlazza were not plaintiffs in the Minnesota federal case, received no notice of the case, and sought to proceed under West Virginia’s rules, not the federal rules. The issue before the Court was whether the parties and the claims overlap sufficiently to bar Smith and Sperlazza from going forward. Typically, the rules blocking access to courts have been read narrowly.

The Supreme Court reversed the lower court rulings enjoining the state court from hearing Smith’s request for a class certification. Justice Kagan explained that the Anti-Injunction Act normally forbids federal courts from enjoining proceedings in state courts. The issue in the federal and state courts must be the same, and the state court plaintiff must have been a party to the prior federal action or fit within some narrow exceptions. Neither of those conditions was satisfied here.

Justice Kagan noted that “in applying this exception, we have taken special care to keep it ‘strict and narrow.’… After all, a court does not usually ‘get to dictate to other courts the preclusion consequences of its own judgment.’ … Deciding whether and how prior litigation has preclusive effect is usually the bailiwick of the second court (here, the one in West Virginia).”

The Court held the issue was not the same because there are differences between the federal rule for certifying class actions and West Virginia’s. Also, Smith was not a party in the prior federal action because the class was never certified to include him and he was not subject to an exception to the nonparty preclusion rule, so the federal court erred in granting the injunction.

The Supreme Court’s ruling in Smith’s and Sperlazza’s favor ensures that the rules blocking plaintiffs from bringing class actions remain narrow, promoting individuals’ ability to hold corporations liable for their actions.

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