ANDERSON, Circuit Judge:
In 1999, the United States District Court for the Northern District of Alabama approved a mandatory, limited fund class settlement, which resolved tens of thousands of claims arising out of injuries allegedly caused by defective silicone breast implants manufactured by Inamed Corporation ("Inamed"). Several years later, in 2006, Zuzanna Juris filed an individual action in California state court against Inamed and Allergan, Inc. ("Allergan"), Inamed's successor, alleging injuries caused by her Inamed implants. The defendants contended that Juris's lawsuit was barred because the 1999 class settlement resolved her claims; Juris posited that she could avoid the settlement's res judicata effect on due process grounds. The district court held that the class settlement precluded Juris from prosecuting the California case. This is Juris's appeal.
For the reasons explained below, we affirm.
Well after the creation of silicone breast implants, women implanted with them began claiming that leaking gel was causing them various diseases. In 1992, the Food and Drug Administration ("FDA") first banned the use of silicone gel implants, and a flood of litigation followed. The FDA relaxed the ban later that year to permit the use of such implants for specified medical procedures. The number of lawsuits only increased further. As a result, the Judicial Panel on Multidistrict Litigation consolidated more than 21,000 cases against various breast implant manufacturers for pretrial proceedings and transferred them to District Judge Sam Pointer in the Northern District of Alabama.
In 1991, women with Inamed breast implants began filing individual suits against Inamed and its subsidiaries. The litigation ballooned. At one point, more than 15,000 lawsuits were pending against Inamed across the country. Breast implant litigation forced the company to divert substantial capital to funding defense efforts. In 1994, in an attempt to stem the tide, Inamed and the plaintiffs' settlement committee negotiated a global settlement agreement, which would have required Inamed to pay $1 million per year for twenty-five years. Anticipating approval of that proposal, Inamed booked the $25 million annuity as a contingent liability in the amount of $9.2 million (the present value of twenty-five annual payments of $1 million). Inamed sought to certify a limited fund settlement class pursuant to Federal Rule of Civil Procedure 23(b)(1)(B) in an effort to secure a mandatory, global resolution of all present and future claims. The plaintiffs' settlement committee retained Ernst & Young to review Inamed's finances and determine whether limited fund treatment was appropriate. Ernst & Young issued a report confirming Inamed's claims that its liabilities, both operational and litigation-related, dwarfed its assets. Counsel for the plaintiffs did not dispute this. However, they questioned whether the $9.2 million present value contribution was prudent considering Inamed's potential future earnings. Disagreement yielded further negotiations, and the possibility of a global settlement languished.
Responding to its growing financial troubles, in 1996, Inamed approached a high risk investment group and raised $35 million through the private placement of senior secured convertible notes. The notes were senior to all claims, including operational liabilities and tort claims, and were secured by interests in substantially all of Inamed's assets. Pursuant to the terms of the offering, Inamed deposited $15 million in escrow for the sole purpose of financing a non-opt-out class settlement if approved before January 23, 1997. That temporal condition was not met. Inamed returned the $15 million to the noteholders in exchange for warrants to purchase Inamed common stock in the event a mandatory class settlement was later approved. Inamed quickly exhausted the balance, $20 million, which provided necessary cash to stay in business and cover expenditures related to inventory, payments to vendors, and other operational items.
In January of 1997, Inamed secured an additional $6.2 million through another private debt placement. All proceeds were immediately applied towards day-to-day operational expenses and payments against past-due income tax liabilities. Around this time, Inamed defaulted on its repayment obligations under the senior secured notes and its stock price dropped. The company continued to explore options for raising working capital. However, between the senior secured noteholders exercising their veto authority over Inamed's ability to raise capital through equity offerings and, more generally, the unavailability of commercially reasonable lending opportunities given the company's dire financial predicament, Inamed's only option was to borrow approximately $10 million from an entity associated with its former chairman.
Throughout the 1990s, each audit letter prepared by Inamed's independent auditing firm, Coopers & Lybrand, included a qualified opinion expressing "substantial doubt about the Company's ability to continue as a going concern." For fiscal years 1995, 1996, and 1997, Inamed reported pre-tax operating losses of $8.6 million, $6.0 million, and $6.6 million, respectively.
In light of Inamed's rapidly deteriorating financial condition, in the latter part of 1997, the company and plaintiffs' counsel revisited settlement negotiations. By this time, investors were unwilling to finance any settlement that would not extinguish substantially all of the breast implant litigation. They considered elimination of the enormous costs and risks associated with the implant litigation an essential precondition to the economic turnaround that would be necessary to repay any investment. Coupling this pressure with the senior secured noteholders' authority over Inamed's financial decisions, Inamed's ability to afford any settlement was dependent on the senior creditors' willingness to finance it.
The parties considered the possibility of Inamed pursuing bankruptcy. Chapter 7 liquidation, as opposed to Chapter 11 reorganization, was the only viable solution to Inamed's financial stresses. If Inamed had elected to pursue Chapter 7 bankruptcy at the end of 1997, the company's saleable assets, discounted by the impairment likely to result from a forced liquidation, would have totaled between $11.4 million and $20.4 million. From this sum, the senior secured noteholders would have been entitled to $19 million, leaving unsecured creditors — trade creditors, subordinated noteholders and tort claimants — with somewhere between $0 and $1.4 million. At best, the tort claimants would have been left to compete for $1.4 million against trade creditors, with rights to payment valued at $12.5 million, and subordinated noteholders, with rights to payment valued at $10 million.
Plaintiffs' counsel, including Ernest Hornsby, an attorney designated to represent the interests of Inamed breast implant recipients with potential, future injury claims, negotiated with Inamed and its senior secured noteholders.
The parties presented Judge Pointer with the proposed settlement, which called for class certification of a $31.5 million mandatory, limited fund class and imposed on Inamed certain disclosure obligations with respect to ongoing breast implant studies. On June 2, 1998, Judge Pointer provisionally certified and approved the mandatory, limited fund class under Rule 23(b)(1)(B). He expressly conditioned permanent certification and final approval "upon an evidentiary showing, to this Court's satisfaction, that a `limited fund' or other circumstances exist satisfying the criteria for mandatory class certification under Rule 23, and that the proposed settlement is in the best interests of the class and should be approved under Rule 23(e)." District Court order, Docket No. 10 at 3. Subsequently, on October 7, 1998, Judge Pointer entered Order 47. Among other things, that order directed that notice be given to all individuals potentially affected by the class settlement. In furnishing the notice plan, Judge Pointer attempted to approximate the level and quality of notice required by Rule 23(b)(3), even though the class was provisionally certified under Rule 23(b)(1)(B).
Judge Pointer first directed notice to be sent to approximately 250,000 women registered with the MDL 926 claims office, estimating that 80,000 were potential class members.
Each of the above-described notices contained the following details: The district court had preliminarily certified and approved a $31.5 million mandatory class settlement against Inamed; if approved, the class settlement would extinguish all claims, filed or otherwise, against Inamed in connection with implants received prior to June 1, 1993; certification and settlement objections had to be postmarked by December 11, 1998; a copy of the proposed settlement could be obtained for free; and a hearing on the propriety of final class certification and settlement approval would be held on January 11, 1999, at the federal courthouse in Birmingham, Alabama.
On January 11, 1999, Judge Pointer held a hearing for the purpose of considering class certification and approval of the settlement. The class's negotiation committee agreed with Judge Pointer that, to the extent there was a conflict between current injury and future injury claimants, it was relevant only to the distribution plan. There were no conflicts with respect to the initial decision as to whether to certify a limited fund class. More specifically, Judge Pointer explained that it would be premature to consider potential conflicts or proper distribution methods before he could be certain that there was, in fact, a settlement fund with money to distribute. He believed it was in the best interest of all members of the proposed class to secure the largest fund possible, as soon as possible, and to bring that fund under the control of the court.
Various concerns were presented at the hearing through oral and written objections. Among the objections presented were the following: (1) the settlement fund was insufficient; (2) future claimants should be entitled to opt out and reserve their legal rights; (3) the settlement lacked a predetermined distribution plan; (4) mandatory class members should nevertheless be given a right to opt out under Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985); (5) notice was inadequate as to future injury claimants; (6) the settlement would violate the Rules Enabling Act; (7) the settlement would improperly side step bankruptcy; (8) Inamed was not a limited fund in light of the slight economic turnaround the company experienced after provisional approval of the mandatory class settlement; (9) the district court should delay consideration of the proposed class settlement in light of the Supreme Court's pending decision in Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999); and (10) the district court did not have jurisdiction to enjoin parallel state court proceedings.
After carefully considering these objections, on February 1, 1999, Judge Pointer entered Order 47A, certifying the non-opt-out settlement class. Judge Pointer concluded that the proposed class satisfied the threshold requirements for certification found in Rule 23(a).
The class was certified pursuant to Rule 23(b)(1)(B), which authorizes certification when "prosecuting separate actions by or against individual class members would create a risk of ... adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests."
Judge Pointer certified the class even though Inamed had experienced a slight financial rebound following announcement of the proposed settlement. Inamed's stock price had risen, suggesting an increased
Judge Pointer additionally evaluated the settlement for fairness pursuant to Rule 23(e)
District Court order, Docket No. 59 at 4.
The class included "all persons and entities, wherever located, who have or may in the future have any unsatisfied claim (whether filed or unfiled, pending or reduced to judgment, existing or contingent, and specifically including claims for alleged injuries and damages not yet known or manifest) ... related to, or involving Inamed Breast Implants that were implanted in an operation that occurred before June 1, 1993." Id. at 1-2. In addition, Order 47A expansively defined "settled claims" as follows:
Id. at 2. The settlement "conclusively compromised, settled and released" all "settled claims" of each member of the class. Id. at 5. Correspondingly, Order 47A permanently enjoined all members of the class "from instituting, asserting or prosecuting against Inamed ... in any pending or future action in any federal or state court, any Settled Claim that the member had, has, or may have in the future." Id.
Judge Pointer made explicit that there was no just reason for delay and that Order 47A constituted a final judgment with respect to all settled claims. All questions regarding distribution of the settlement fund would be subject to subsequent orders enforcing the court's judgment, based on Judge Pointer's belief that these considerations were irrelevant to the question of whether the overall fund available was adequate. Accordingly, Order 47A states that, "[w]ithout deferring or delaying the finality of this order and judgment, this court retains exclusive and continuing jurisdiction to (1) implement, interpret, and enforce the Settlement Agreement, (2) administer, allocate, and distribute the settlement fund, and (3) rule on any applications for cost and expenses incurred in implementing this order and the Settlement Agreement." Id. No appeal was taken from Order 47A.
Order 47A merely certified the limited fund class and approved the settlement insofar as it required Inamed to infuse the
In May of 1999, the court preliminarily approved the proposed distribution plan and ordered notice of it sent to approximately 350,000 implant recipients on file, of whom 45,000 were likely Inamed settlement class members. The notice requested comments and objections to the proposal. The court received sixty-two objections to the proposal. Many of the objections concentrated on the perceived inequity of the plan's failure to differentiate between claimants without injuries and claimants with current injuries. Following a July 6, 1999, hearing, Judge Pointer overruled these objections, citing the unique financial constraints affecting the settlement terms. He explained that the fund was so severely limited in relation to the number of claimants, that a distribution plan differentiating between claimants with varying degrees of injuries would have "substantially increased administrative costs," "not greatly increase[d] the amount of distribution to those determined to be eligible for enhanced benefits," and "decrease[d] even more the meager distribution to other claimants." District Court order, Docket No. 70 at 5.
In sum, Judge Pointer agreed with class counsel that pro rata division remained "the only workable solution under the facts of this case," and he approved the proposed distribution plan. Id. On July 7, 1999, he entered Order 47B, pursuant to which the settlement fund was promptly distributed by equal pro rata division, without reference to the extent of injuries or expenses, to eligible class members who returned satisfactory claim forms prior to October 1, 1999. Each claimant ultimately received approximately $725. Class counsel received no fees out of the Inamed settlement fund.
For fiscal year 1998, Inamed's net sales increased by twenty-four percent. It reported a net income in 1998, compared to a substantial net loss in 1997. However, Inamed's book value in 1998 was still negative $15,625,000, and it remained a debt-ridden company. By 1999, Inamed began reporting a much improved operating income, openly attributing its profitability to settling the breast implant litigation and an aggressive cost-reduction program. On September 1, 1999, Inamed purchased Collagen Aesthetics, Inc., for approximately $159 million, the funding for which was provided by substantial borrowing. Nevertheless, even after undergoing a public offering to raise proceeds to pay the debt incurred in the purchase, Inamed's financial viability remained precarious.
Around 2002, Plaintiff Zuzanna Juris began experiencing "chronic fatigue, severe chest wall and breast pain, capsular contraction, joint and muscle pain, muscle weakness, significant weight loss, severe headaches, skin rashes, memory loss, and loss of mental acuity." In May of 2005, a surgeon removed her implants. Upon removal, the surgeon discovered that the implants, which Juris received in 1991,
On March 23, 2006, Allergan purchased substantially all of Inamed's outstanding common stock, as well as its wholly-owned subsidiary, McGhan Medical Corporation ("McGhan"). Shortly thereafter, on May 16, 2006, Juris filed suit against Allergan, Inamed, and McGhan (hereinafter, collectively, "Allergan") in the Superior Court of California for the County of Los Angeles. She alleged that Inamed/McGhan breast implants caused her injuries and asserted claims for strict liability, negligence, breach of express warranty, breach of implied warranty, deceit/negligent misrepresentation, and intentional infliction of emotional distress. Allergan filed a demurrer to Juris's complaint, arguing that the "doctrine of res judicata ... gives conclusive effect to the [Inamed] settlement and bars [Juris] from re-litigating her claims in this case." Juris responded that applying res judicata as a bar to her claims would deprive her of due process.
On September 20, 2006, Allergan filed a motion in the district court for the Northern District of Alabama — the Inamed class action court — requesting that Juris and her attorney show cause why they should not be held in contempt for violating Order 47A's anti-suit injunction. Allergan contended that Juris was a member of the Inamed settlement class and her claims were "settled claims" as defined in Order 47A. As a result, the company argued, the settlement's injunction prohibited Juris's lawsuit. In her opposition to Allergan's contempt motion, Juris argued that she had a right to collaterally attack the class judgment and that the Anti-Injunction Act denied the district court power to enjoin the California state court action. Subsequently, on October 19, 2006, counsel for both parties jointly requested that the California court stay the proceedings before it, pending a decision from the district court. Their joint motion stated that they "agree that [Juris's] legal and constitutional challenge to Order No. 47A should be brought before the Alabama district court, and that the Los Angeles Superior Court should not rule on this issue."
On October 3, 2008, District Judge U.W. Clemon traveled to California, where he heard evidence and oral argument from the parties on Allergan's show cause motion.
Juris advanced four arguments: (1) she may raise a collateral attack against the
Judge Proctor noted that, although Juris had initially argued that the California court was the only proper court to entertain her collateral challenge to the Inamed class settlement, she subsequently abandoned that position and agreed to resolve the collateral challenge in the district court in Alabama. However, in an abundance of caution, Judge Proctor nevertheless addressed the merits of the issue of the appropriate forum. Concluding that "Juris' arguments have evolved from defensive, forum-specific contentions to offensive, relief-oriented requests," Judge Proctor construed Juris's filings as a motion for relief from judgment pursuant to Federal Rule of Civil Procedure 60(b). District Court order, Docket No. 303 at 33-34. He held that the class action court properly could consider Juris's collateral challenge.
In addition, with respect to Juris's contention that Rule 23(b)(1)(B) certification was improper under the requirements outlined in Ortiz, Judge Proctor held that Juris's substantive attack on Orders 47A and 47B, which were not appealed, were foreclosed by res judicata. In the alternative, he held that "even if Juris were able to contest Judge Pointer's conclusions of law ... the Inamed Class Settlement was properly certified as a limited fund." Id. at 45.
Judge Proctor specifically rejected Juris's contention that post-settlement financial disclosures, which placed Inamed's economic status in a more positive light than the evidence presented at class certification, provided a basis for setting aside the judgment. He emphasized the fact that the reports at issue reflected Inamed's financial position after announcement and final approval of the settlement. He additionally observed that provisional certification of the class had an "incalculable impact" on Inamed's financial status by enjoining all litigation by the then-putative class. Most importantly, Judge Proctor found that Juris was ignoring one essential point: "If Inamed had not resolved the breast implant cases on a global scale, then the company was destined for liquidation at the direction of its senior secured creditors — a fact which Juris has never disputed." Id. at 62. Thus, Judge Proctor concluded that Juris's argument was circular; it simply made no sense to say that certification of the Inamed settlement was flawed because Inamed rebounded, when it was the settlement itself that prompted the rebound.
Judge Proctor undertook an independent analysis of Inamed's financial condition at the time of the certification, examining the evidence on which Judge Pointer had relied. Judge Proctor's analysis confirmed Judge Pointer's previous findings. Judge Proctor found that the $31.5 million settlement fund was "the maximum value available for settling the pending tort claims." Id. at 52, 65. Judge Proctor also confirmed the earlier findings by Judge Pointer that the $31.5 million was substantially greater than the then-value of the entirety of Inamed's net assets, and that the magnitude of the claims of the class members greatly exceeded that amount.
Accordingly, the district court granted in part and denied in part Allergan's motion for an order to show cause. Although the court declined to hold Juris or her counsel in contempt for violating Order 47A's anti-suit injunction, it held that she was bound by Judge Pointer's injunction, prohibiting her from proceeding with the California litigation. Correspondingly, the district court denied Juris's request to be excluded from the Inamed class settlement, which the court construed as a Federal Rule of Civil Procedure 60(b) motion.
On appeal Juris argues: (A) that she can collaterally challenge the res judicata effect of the Inamed class settlement; (B) that the California court — not the Northern District of Alabama — is the appropriate forum for the collateral attack; and (C) that she was denied fundamental due process during the Inamed class proceedings in that (1) she did not receive adequate notice, (2) she was not adequately represented, and (3) she was denied the right to opt out. In addition, Juris seeks to escape the preclusive effect of the class settlement by arguing that Judge Pointer erred in certifying the class under Rule 23(b)(1)(B) (which we address in Part II.D). Finally, she urges us to conclude that the Anti-Injunction Act prohibited the district court from enjoining her state court suit (which we address in Part II.E)
Class action judgments will typically bind all members of the class. Kemp v. Birmingham News Co., 608 F.2d 1049, 1054 (5th Cir.1979).
Twigg, 153 F.3d at 1226; see also 3 William B. Rubenstein et al., Newberg on Class Actions § 8:30 (4th ed. 2011) ("A right of collateral attack, through which the essential fairness of a judgment is questioned during subsequent litigation, remains a potential limitation on the binding effect of determinations in representative actions.").
The propriety of collateral attacks "is amply supported by precedent." Stephenson v. Dow Chem. Co., 273 F.3d 249, 258 (2d Cir.2001), aff'd in part by an equally divided court and vacated in part, 539 U.S. 111, 123 S.Ct. 2161, 156 L.Ed.2d 106 (2003); see Hansberry v. Lee, 311 U.S. 32, 42, 61 S.Ct. 115, 118, 85 L.Ed. 22 (1940) ("[T]here has been a failure of due process only in those cases where it cannot be said that the procedure adopted [in the representative action], fairly insures the protection of the interests of absent parties who are to be bound by it."). Absent class members can collaterally challenge the res judicata effect of a prior class judgment either because they were not adequately represented, see, e.g., Gonzales v. Cassidy, 474 F.2d 67, 72 (5th Cir.1973); Stephenson, 273 F.3d at 261; Van Gemert v. Boeing Co., 590 F.2d 433, 440 n. 15 (2d Cir. 1978), or because there was not adequate notice, see, e.g., Twigg, 153 F.3d at 1229; Johnson v. Gen. Motors Corp., 598 F.2d 432, 434 (5th Cir.1979); King v. S. Cent. Bell Tel., 790 F.2d 524, 530 (6th Cir.1986); Pate v. United States, 328 F.Supp.2d 62, 73-74 (D.D.C.2004). In addition, absent class members have successfully attacked a class action court's ability to bind them by arguing that they were denied the ability to opt out or exclude themselves from the class. See, e.g., Brown v. Ticor Title Ins. Co., 982 F.2d 386, 392 (9th Cir.1992), cert. dismissed, 511 U.S. 117, 114 S.Ct. 1359, 128 L.Ed.2d 33 (1994).
The traditional collateral attack involves a class member commencing a separate suit on a similar subject matter as a prior class settlement, the defendant's assertion that the prior class settlement has preclusive effect and bars the new suit, and the class member's contention that giving res judicata effect to the prior settlement would violate her rights to due process. At the same time, "[a] related, collateral method for attacking judgment finality after expiration of the appeals period is available under federal Rule 60(b)." 3 William B. Rubenstein et al., Newberg on Class Actions § 8:30 (4th ed.2011). Courts treat Rule 60(b)(4) motions, pursuant to which a litigant can seek relief from a final judgment on the grounds that "the judgment is void," as a vehicle for absent class members to advance the same due process challenges that can be raised in a traditional collateral attack. See In re Diet Drugs Prods. Liab. Litig., 431 F.3d 141, 145 (3d Cir.2005) ("This [due process] 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."); Arthur Andersen & Co. v. Ohio (In re Four Seasons Sec. Laws Litig.), 502 F.2d 834, 842-44 (10th Cir. 1974) (analyzing due process challenge to binding effect of prior class settlement in the context of a Rule 60(b)(4) motion); Battle v. Liberty Nat'l Life Ins. Co., 770 F.Supp. 1499, 1522-23 (N.D.Ala.1991) (same), aff'd, 974 F.2d 1279 (11th Cir. 1992). "Since the claim in both instances is that the judgment is void and since the requirements for a valid judgment are not altered by the setting in which validity is tested, this treatment seems logical." Note, Collateral Attack on the Binding
As a preliminary matter, we must ensure that the district court was the proper forum to resolve Juris's due process challenge. Early on, in response to Allergan's contempt motion, Juris posited that she had the right to select the court where she would pursue her attack on the binding effect of the Inamed class settlement. She complained that she should not be forced to travel across the country to Alabama to litigate her constitutional challenge in the class action court. Instead, Juris maintained, she should be allowed to launch a traditional collateral attack in the California state court.
Juris relies principally on the Third Circuit's decision In re Real Estate Title & Settlement Services Antitrust Litigation, 869 F.2d 760 (3d Cir.1989). In that case, following settlement of a multidistrict class action in the Eastern District of Pennsylvania, absent class members filed an Arizona state court action collaterally attacking the class settlement. Id. at 762. The Pennsylvania district court enjoined the Arizona litigation, holding that if the plaintiffs wished to challenge the due process safeguards they received in the class proceeding,
Id. at 768. The court characterized the issue as "whether an absent class member can be enjoined from relitigation if the member does not have minimum contacts with the forum." Id. at 769. On this point, the court held that "if the member has not been given the opportunity to opt out in a class action involving both important injunctive relief and damage claims, the member must either have minimum contacts with the forum or consent to jurisdiction in order to be enjoined by the district court that entertained the class action." Id. Because the plaintiffs were not given an opportunity to opt out of the class settlement, did not have minimum contacts with Pennsylvania, and had not consented to jurisdiction in the Pennsylvania district court, the Third Circuit vacated the injunction; and the plaintiffs were allowed to proceed with their collateral attack in Arizona. Id.
Juris complains that she was similarly "haled across the country" to defend Allergan's contempt motion, even though she did not have the opportunity to opt out of the Inamed class settlement, she did not have minimum contacts with Alabama, and she did not consent to the jurisdiction of the Alabama district court. That is, she ended up litigating in Alabama by nothing more than the "fortuity" that, years earlier, thousands of lawsuits related to silicone breast implants were consolidated by the Judicial Panel on Multidistrict Litigation and transferred to the Northern District of Alabama. Juris contends that the California state court action should have been allowed to proceed to decide whether she was afforded due process in the Inamed class settlement. We cannot agree.
First, Real Estate did not involve a limited fund class action. The prior settlement in that case involved a "hybrid class," which sought substantial damages, but primarily injunctive relief, certified pursuant to Rule 23(b)(1)(A) and Rule 23(b)(2). Id. at 764, 768. The Third Circuit limited its holding to the facts before it, stating that it was not "address[ing] the due process requirements in a class action certified under 23(b)(1)[B] in which there is only a limited common fund from which the plaintiffs can obtain relief."
Second, and more importantly, we hold that Juris consented to jurisdiction in the court below.
Given her express consent, we have no difficulty concluding that the Alabama district court was the proper forum to resolve Juris's constitutional challenge to the res judicata effect of the Inamed class settlement. Juris cannot now be heard to complain that she was "haled across the country" to a forum for which she did not have minimum contacts or consent to jurisdiction. We do not reach the issue left open by the Third Circuit in Real Estate — whether, in the absence of her express consent to jurisdiction, it would have run afoul of the due process clause to require Juris to litigate her collateral attack on the limited fund settlement in the certifying court.
Juris argues that the Inamed settlement should not be given res judicata effect because she did not receive adequate notice of the class proceedings. She does not challenge the class judgment on the theory that the content of the notices was constitutionally inadequate. See Twigg v. Sears,
The notice provisions of Rule 23, which are meant to protect the due process rights of absent class members, set forth "different notice requirements to different kinds of cases and even to different phases of the same case." Battle v. Liberty Nat'l Life Ins. Co., 770 F.Supp. 1499, 1515 (N.D.Ala.1991), aff'd, 974 F.2d 1279 (11th Cir.1992). The rule itself does not require notice in Rule 23(b)(1) and (b)(2) class actions. See Fed.R.Civ.P. 23(c)(2)(A)-(B). Instead, in these "mandatory" class actions, Rule 23 allows courts to exercise their discretion to provide appropriate notice "to protect class members and fairly conduct the action." Fed. R.Civ.P. 23(c)(2)(A), (d)(1)(B); see also 3 William B. Rubenstein et al., Newberg on Class Actions § 8:5 (4th ed. 2011) ("[T]he court may make appropriate orders requiring notice to some or all of the members regarding the pendency of the class, proposed judgment or settlement, soliciting input on the adequacy of class representation, opportunity to intervene or present claims or defenses, and the like."). "Regardless of the category under which a class suit may be or potentially may be certified, however, Rule 23(e) requires that absent class members be informed when the lawsuit is in the process of being voluntarily dismissed or compromised." Id. § 8:17; see Fed.R.Civ.P. 23(e)(1).
Under certain circumstances, however, even when not provided for by Rule 23, due process may require that class members receive notice of the pendency of the proceeding. See, e.g., Johnson v. Gen. Motors Corp., 598 F.2d 432, 437 (5th Cir.1979) (holding that due process required notice, "[a]lthough under the
In Temple, an asbestos manufacturer moved to consolidate all present and future asbestos-related injury actions against it and to certify a mandatory class action. Id. at 1270. The company asserted that certification was warranted under Rule 23(b)(1)(B) because its assets constituted a limited fund in the sense that they were insufficient to satisfy all claims. Id. at 1271. Without notifying any putative class members or conducting an adversarial proceeding on the existence of a limited fund, the district court accepted the defendant's assertions. Id. The district court found that the company's insurance and other funds would not be able to cover its potential tort liability, and it observed that the costs of defending numerous small actions were rapidly depleting the company's resources. Id. On appeal, we held that the certification was due to be reversed because, inter alia, "[t]he [district] court's failure to notify petitioners of the certification hearing violated due process." Id. at 1272. We reasoned that, "[u]nlike class members in cases certified under 23(b)(3) who may opt out of the action and have no need for prior notice of efforts to obtain class certification, members of a mandatory class need to be provided with notice to contest the facts underlying a certification they may strenuously oppose." Id. The lack of notice produced a non-adversarial proceeding that "almost certainly led to the premature and speculative finding that a limited fund existed." Id. Therefore, we held, the district court's order "clearly violate[d] the individual constitutional rights of the petitioners." Id.
The due process violation in Temple arose because the district court certified a mandatory, limited fund class action without any notice to absent class members. The decision does not stand for the proposition that the Constitution requires that each individual class member receive actual notice. Instead, our concern was with the total absence of notice, which led to the "non-adversarial nature of the [class certification] proceedings." Id. at 1272. We therefore agree with the district court that Temple is not controlling in this case. Where the notice afforded reaches a critical mass of putative class members, such that the facts underlying certification are contested and approached in a sufficiently adversarial manner, the due process pitfall identified in Temple can be avoided.
The careful analysis of the notice mandated by due process in Battle, 770 F.Supp. 1499, is also persuasive here.
Id. at 1520 (citation omitted). As such, Battle holds that when a mandatory class is composed of plaintiffs with singular interests, and where the representatives and objectors reflect the interests of those who did not receive notice, failure to individually notify each class member will not equate to a constitutional violation.
To the extent that Temple and Battle require notice to ensure that the class certification and the underlying facts supporting it are sufficiently scrutinized and to ensure that the varied interests of non-participating class members are represented, notice in the present case was sufficient to satisfy due process. Judge Pointer directed individual notices to be mailed to 250,000 women who had registered with the claims office and 28,000 attorneys representing Inamed breast implant recipients. He also ordered that notice of the proposed settlement and the certification-fairness hearing be published in People Magazine, USA Today, and Modern Healthcare Magazine, as well as on Modern Healthcare Magazine's website and the district court's website. At the certification-fairness hearing, potential class members — including those with no manifested injury — objected, arguing among other things that the settlement fund was too small, that the named class representatives did not adequately reflect the putative class members' varying degrees of injuries, that future claimants should be allowed to opt-out of the class, that the settlement would improperly sidestep the bankruptcy system, and that Inamed did not constitute a limited fund in light of the company's economic rebound. The hearing was far different from "[t]he district court's ex parte proceeding" in Temple, which "denied petitioners their right to contest [the asbestos company's] assertions." 851 F.2d at 1272. The proceedings before Judge Pointer were sufficiently adversarial.
Even with the benefit of hindsight, Juris cannot point to a single objection that she would have raised that was not actually advanced by putative class members before Judge Pointer. Accordingly, the ordered notice amply satisfied the requirements of Temple and Battle that absent class members be sufficiently informed of the pendency of the action.
Juris's conclusory assertion that the Inamed class settlement cannot be given preclusive effect because "[t]here is no dispute that she did not receive actual notice" rests on a faulty premise. As demonstrated by our discussion of Temple and Battle, where due process calls for absent members of a mandatory class to receive notice, it does not automatically require that the notice match that in a 23(b)(3) class action. That is, something less than "the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort," may suffice. Fed.R.Civ.P. 23(c)(2)(B); see also 3 William B. Rubenstein et al., Newberg on Class Actions § 8:13 (4th ed. 2011) ("As a rule, class certification notice, even if held to be required in a Rule 23(b)(1) ... class suit by ... due process, will invariably mean significant cost savings by means of published or other general notice, compared to the corresponding but stricter requirements of individual Rule 23(c)(2)
However, even assuming this heightened standard applied, Juris would be unable to demonstrate that the notice in the class proceeding was constitutionally deficient. Courts have consistently recognized that, even in Rule 23(b)(3) class actions, due process does not require that class members actually receive notice. See Silber v. Mabon, 18 F.3d 1449, 1453-54 (9th Cir.1994) (explaining that even in an opt-out class action, class notice standard is "best practicable," as opposed to "actually received"); Adams v. S. Farm Bureau Life Ins. Co., 417 F.Supp.2d 1373, 1380 n. 6 (M.D.Ga.2006) ("The analysis for purposes of due process is on the notice plan itself, and actual receipt of notice by each individual class member is not required."), aff'd, 493 F.3d 1276 (11th Cir.2007); In re Prudential Sec. Inc. Ltd. P'ships Litig., 164 F.R.D. 362, 368 (S.D.N.Y.1996), ("It is widely accepted that for the due process standard to be met it is not necessary that every class member receive actual notice...."), aff'd, 107 F.3d 3 (2d Cir.1996); Trist v. First Fed. Sav. & Loan Ass'n of Chester, 89 F.R.D. 1, 2 (E.D.Pa.1980) ("Mullane [v. Central Hanover Bank & Trust Co., 339 U.S. 306, 313, 70 S.Ct. 652, 656, 94 L.Ed. 865 (1950)], has never been interpreted to require the sort of actual notice demanded by the defendants ...."); see also 4 William B. Rubenstein et al., Newberg on Class Actions § 11:53 (4th ed. 2011) ("Thus, due process does not require actual notice, but rather a good faith effort to provide actual notice. Courts have consistently recognized that due process does not require that every class member receive actual notice so long as the court reasonably selected a means likely to apprize interested parties."); 7AA Charles Alan Wright et al., Federal Practice & Procedure § 1789.1 (3d ed. 2005) ("[A]s long as the notice scheme that is adopted meets [the constitutional standards], courts generally have ruled that an absent class member will be bound by any judgment that is entered, even though the absentee never actually received notice."). Where certain class members' names and addresses cannot be determined with reasonable efforts, notice by publication is generally considered adequate. See In re Agent Orange Prod. Liab. Litig., 818 F.2d 145, 168-69 (2d Cir.1987) (finding that, with respect to a 23(b)(3) class, unidentified absent class members that could not be located through reasonable efforts did not need to be provided with individual, mailed notice in order to be bound); Gordon v. Hunt, 117 F.R.D. 58, 63 (S.D.N.Y. 1987) ("This combination of mailed notice to all class members who can be identified by reasonable effort and published notice to all others is the long-accepted norm in large class actions."). Juris cites no case law to the contrary.
Judge Pointer constructed a notice campaign which he intended to approximate the level of notice that would have been provided to a Rule 23(b)(3) class. Juris has done nothing to call into question the fact that the dissemination of notice was — as Judge Pointer intended, and Judge Proctor later found — the best practicable under the circumstances. We hold that the notice campaign in the Inamed class action was sufficient in a constitutional sense, and we cannot conclude that there was a deficiency in notice that prevents res judicata from attaching to the class settlement.
Juris additionally seeks to circumvent the binding effect of the Inamed class settlement on the basis that she was not adequately represented. She claims she was inadequately represented for several reasons; we address her arguments in turn.
"Due process of law would be violated for the judgment in a class suit to be res judicata to the absent members of a class unless the court applying res judicata can conclude that the class was adequately represented in the first suit." Gonzales v. Cassidy, 474 F.2d 67, 74 (5th Cir.1973).
Id. at 72.
Juris argues that Judge Pointer erred by failing to create discrete subclasses for those breast implant recipients with current injuries and those with only potential, future injuries. She relies primarily on Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). In Amchem, the Supreme Court analyzed, on direct appeal, the certification of a settlement-only class action involving persons exposed to asbestos products. The "sprawling class" included not only presently injured individuals, but also those who had only been exposed to asbestos with no present manifestation of injury. Id. at 602-03, 117 S.Ct. at 2239-40. The Court reversed class certification, noting, among other defects, that Rule 23(a)(4)'s requirement that the named representatives "will fairly and adequately protect the interests of the class" had not been satisfied. Id. at 625, 117 S.Ct. at 2250. Importantly, the Court reasoned:
Id. at 626, 117 S.Ct. at 2251.
Quoting from a Second Circuit decision, the Court shed light on its precise concern: "The class members may well have thought that the Settlement serves the aggregate interests of the entire class. But the adversity among subgroups requires that members of each subgroup cannot be bound by a settlement except by consents given by those who understand that their role is to represent solely members of their respective subgroups." Id. at 627, 117 S.Ct. at 2251 (quoting In re Joint E. & S. Dist. Asbestos Litig., 982 F.2d 721, 742-43 (2d Cir.1992), modified on reh'g, 993 F.2d 7 (2d Cir.1993)). The crux of the problem in Amchem was that there was "no assurance ... either in the terms of the settlement or in the structure of the negotiations — that the named plaintiffs operated under a proper understanding of their representational responsibilities."
Two years later, in Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999), the Court again discussed the potentially conflicting interests within a class of current and future injury asbestos claimants certified for global settlement purposes. Id. at 856, 119 S.Ct. at 2319. According to the Court, under the law of Amchem, "a class divided between holders of present and future claims (some of the latter involving no physical injury and attributable to claimants not yet born) requires homogenous subclasses under Rule 23(c)[], with separate representation to eliminate conflicting interests of counsel." Id. Ortiz involved Rule 23(b)(1)(B) certification requirements, as opposed to Rule 23(a)(4), but the Court found that the intra-class conflict was "as contrary to the equitable obligation entailed by the limited fund rationale as it was to the requirements of structural protection applicable to all class actions under Rule 23(a)(4)." Id. at 856, 119 S.Ct. at 2320; see id. at 856 n. 31, 119 S.Ct. at 2319 n. 31 (noting that the Rule 23(b) "adequacy of representation concern parallels the enquiry required at the threshold under Rule 23(a)(4)").
The cases describe a requirement that there be structural assurances of adequate representation that protect against the conflicting goals of present and future injury class members. These protections must ensure that class representatives understand that their role is representing solely members of their respective constituency, not the whole class. Although we need not rule definitively, Amchem and Ortiz appear to hold that Rule 23(a)(4) calls for some type of adequate structural protection, which would include, but may not necessarily require, formally designated subclasses.
Judge Pointer and class counsel put in place procedures to protect against antagonistic alignment within the class and avoid the fatal flaw in Amchem. Judge Pointer appointed six Inamed breast implant recipients as class representatives, among them, a representative with no manifested injury, one with minor to moderate injuries, and one who was totally disabled. He appointed five attorneys with extensive breast implant trial experience as class counsel. Most significantly, and anticipating an Amchem problem, separate counsel, Ernest Hornsby, was specifically brought in for the sole purpose of representing those plaintiffs with only potential, future injuries. Thus, even prior to provisional certification of the class, the interests of those claimants with unmanifested injuries were represented and given a separate seat at the negotiation table through qualified and independent counsel.
In contrast with Amchem and Ortiz, the structure of the negotiations in the case at bar ensured that class representatives operated with a proper understanding of their representative responsibilities. The negotiation process did not resemble that in Amchem and Ortiz where there were no structural assurances whatsoever and where nobody "exclusively advanced the particular interests of either subgroup."
Our holding that formal subclasses were not constitutionally required is reinforced by Judge Proctor's unchallenged findings. According to Judge Proctor, "the class's court-appointed representatives and counsel served as the functional equivalents of formally sub-classed groups, which ensured that the class representatives, as well as their counsel, participated directly in negotiations and litigation." District Court order, Docket No. 303 at 93. He additionally found that formal sub-classing would have been "superfluous" because Judge Pointer received objections that mirrored the concerns that subdivided "currents" and "futures" subclasses likely would have produced respectively. Id. at 95. On appeal, Juris does not contest Judge Proctor's findings, and she has not articulated how formal subclasses would have provided increased assurance of adequate representation.
Juris does argue that "Hornsby did not, and could not, vigorously and tenaciously protect the plaintiff's interests" because "Hornsby represented all kinds of plaintiffs in the Inamed litigation — those who had no current injuries, some who had current injuries, and some who were going to develop a condition or disease in the future." Juris's initial appellate brief makes this conclusory assertion, without even labeling it a conflict of interest, and provides no follow-up argument on the issue.
"A federal appellate court will not, as a general rule, consider an issue that is raised for the first time on appeal." In re Pan Am. World Airways, Inc., 905 F.2d 1457, 1461-62 (11th Cir.1990). "The corollary of this rule is that, if a party hopes to preserve a claim, argument, theory, or defense on appeal, she must first clearly present it to the district court, that is, in such a way as to afford the district court an opportunity to recognize and rule on it." Id. at 1462. In her appellate briefs, Juris cites to a portion of the hearing before Judge Proctor in which Hornsby made a stray remark that, at the beginning, he represented some breast implant plaintiffs with current injuries and some with no
Having foregone an opportunity to explore Hornsby's representation before Judge Proctor (at which time the matter could have been investigated and clarified), and having raised the conflict-of-interest claim in such a vague and tangential manner on appeal, Juris has waived it. Having doubly waived the conflict of interest issue, and especially having deprived Allergan of the opportunity to adduce evidence to clarify the situation, Juris is deemed to have abandoned the issue. See id. at 1461-62; Marek v. Singletary, 62 F.3d 1295, 1298 n. 2 (11th Cir.1995).
Even setting aside Juris's abandonment of this issue, we would hold that the record amply supported Judge Proctor's finding that counsel in this case served as the functional equivalents of formal subclasses, such that the situation falls far short of a due process violation. The record reveals that the parties agreed, and Judge Pointer was aware, that Hornsby represented solely future claimants with no current manifestations of injury. An affidavit submitted by class counsel in support of provisional certification of the Inamed settlement class provides as follows:
Subsequently, when adopting the proposed distribution plan, Judge Pointer stated: "Class counsel — some of whom represent clients with existing medical problems and others of who represent clients without presently documented problems — have, with the Court, struggled ... and reluctantly come to the conclusion that pro rata division remains the better — and indeed only workable — solution under the facts of this case." District Court order, Docket No. 70 at 5. This establishes not only that Hornsby was brought in and designated to represent exposure-only class members, but also that this procedural safeguard was put in place for the express purpose of addressing the divergent interests that could arise between present and future injury claimants. For this reason, even if Hornsby had previously represented some clients with current injuries, he, by agreeing
Juris next urges us to find that she was not in fact adequately represented because Hornsby did not prosecute an appeal of Order 47A, the order certifying the settlement-only class and approving the settlement as fair, based on Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999). The Supreme Court's decision in Ortiz, which was still pending when Judge Pointer entered Order 47A, ultimately narrowed the grounds upon which certification of a limited fund class settlement could be supported. In support of her failure-to-appeal argument, Juris cites Gonzales v. Cassidy, 474 F.2d 67 (5th Cir.1973).
In Gonzales, the plaintiffs collaterally attacked a class action judgment on the grounds that they had not been adequately represented. Id. at 72. In the prior proceeding, a three-judge district court declared a Texas statute unconstitutional. Id. at 71. However, that court limited the scope of relief by holding that its order only applied retroactively to the named plaintiff himself; with respect to all other class members, the court's order granted only prospective relief. Id. "Having obtained relief for himself, [the class representative] did not appeal the court's denial of retroactive relief to the other members of his class." Id. The district court rejected the argument that this constituted inadequate representation. Id. 72.
On appeal, the former Fifth Circuit found that the named plaintiff's representation was adequate up through the time that the three-judge court entered its final order. Id. at 75. The Court then characterized the "narrow question" before it as "whether [the class representative's] failure to appeal this order, which denied retroactive relief to all members of the class except [himself], constitutes inadequate representation so that they are not bound by the judgment." Id. Concluding that the failure to appeal rendered the representation inadequate, the court explained:
Id. at 76.
Gonzales is easily distinguished from the case at bar. That case does not hold that a class representative's failure to appeal, in the abstract, will render representation inadequate. Critically, the absent plaintiffs in Gonzales had been "denied any relief" by the unappealed judgment's prospective application, and the fact that the representative had secured a better deal for himself than the remainder of the class prompted him not to pursue an appeal. See Brown v. Ticor Title Ins. Co., 982 F.2d 386, 390 (9th Cir. 1992) ("In Gonzales, the class members collaterally attacked the settlement, demonstrating that the class representative secured a better monetary deal for himself than the rest of the class, and it was because of this that he failed to pursue an appeal on behalf of the class. In the
Additional factors establish that Hornsby's decision not to appeal did not constitute inadequate representation. First, even if filed the same day the Supreme Court decided Ortiz, any appeal of the limited fund class certification would have been untimely. Judge Pointer entered Order 47A on February 1, 1999, and the Ortiz decision was released on June 23, 1999, approximately five months later. More significantly, there was a compelling tactical reason for Hornsby not to pursue an appeal of Order 47A. Inamed's senior creditors had conditioned financing of the settlement on certification of a mandatory class, and the undisputed evidence established that if class representatives or objectors successfully appealed, those lenders would have withdrawn financing and forced Inamed into a Chapter 7 liquidation. Hornsby later explained, "I didn't file a notice of appeal obviously because I just didn't see where — it would have made the only arrangement that could have gotten claimants anything collapse because it would have delayed it, the investors would have pulled out and gone on, and I just didn't see the benefit." Opting not to take an appeal was not antagonistic to Juris's interests. Instead, it was a strategic decision that protected exposure-only claimants by ensuring that a limited fund even existed for the class's benefit.
Under these circumstances, Hornsby's decision not to prosecute an appeal of Order 47A based on the then-pending Ortiz does not call into question the extent to which he "vigorously and tenaciously protected the interests of the class." Gonzales, 474 F.2d at 75. That decision, therefore, did not render Hornsby's representation constitutionally inadequate.
In conclusion, Juris has not presented facts demonstrating a due process violation stemming from the lack of adequate representation.
Juris further argues that applying the Inamed settlement to bar her claims would violate due process because she did not have an opportunity to opt out or exclude herself. Juris asserts that because she was a California resident with no contacts with Alabama, the class action court — Judge Pointer's court — never had personal jurisdiction over her. Therefore, she urges us to conclude that, pursuant to Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985), she had a constitutional right to opt out.
In Shutts, the Supreme Court described the procedural requirements for asserting personal jurisdiction over absent, nonresident class members in a Kansas class action that asserted claims for money damages.
The Court held that "a forum State may exercise jurisdiction over the claim of an absent class-action plaintiff, even though that plaintiff may not possess the minimum contacts with the forum which would support personal jurisdiction over a defendant." Id. It proceeded to explain that a forum state could bind absent plaintiffs "concerning a claim for money damages or similar relief at law," so long as certain procedural protections are provided. Id. at 811-12, 105 S.Ct. at 2974. Namely, under the circumstances of that case, absent plaintiffs needed to receive notice and an opportunity to be heard, an opportunity to remove themselves from the class by returning an opt out, and adequate representation. Id. at 812, 105 S.Ct. at 2974. Because these minimal due
Significantly, the question now before us — whether Shutts requires that an absent class member be afforded an opportunity to exclude herself from a limited fund class settlement — presents a question of first impression in this Circuit.
In a limited fund class action, the presence within the jurisdiction of a res or fund that is the subject of the litigation resolves the personal jurisdiction objection of absent claimants. See Flanagan v. Ahearn (In re Asbestos), 90 F.3d 963, 987 (5th Cir.1996) ("The court can appropriately adjudicate all claims against the fund because of its jurisdiction over the fund ....");
Juris dedicates other portions of her briefs to arguing that Judge Pointer erred in certifying the Inamed settlement class. She claims that the class did not conform to the Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999), requirements for certification under Rule 23(b)(1)(B), and also that the settlement was not an appropriate substitute for bankruptcy. We hold that these arguments are — at this stage — barred by res judicata.
In Ortiz, the Supreme Court reversed class certification in a Rule 23(b)(1)(B) limited fund class action that purported to settle actual and potential asbestos-related tort claims. After describing traditional limited funds, the Court identified three "common characteristics" consistent with the "historical limited fund model." Id. at 838, 119 S.Ct. at 2311. "The first and most distinctive characteristic," Ortiz explains, "is that the totals of the aggregated liquidated claims and the fund available for satisfying them, set definitively at their maximums, demonstrate the inadequacy of the fund to pay all the claims." Id. The second historical characteristic is that "the whole of the inadequate fund was to be devoted to the overwhelming claims." Id. at 839, 119 S.Ct. at 2311. The third characteristic is that "the claimants identified by a common theory of recovery were treated equitably among themselves." Id. According to the Court, these characteristics should be treated as "presumptively necessary, and not merely sufficient," to justify certification of a Rule 23(b)(1)(B) limited fund class. Id. at 842, 119 S.Ct. at 2312. Because the settlement at issue in Ortiz failed to satisfy these presumptively necessary characteristics, the Court concluded that certification was improper. Id. at 864, 119 S.Ct. at 2323. Ortiz ultimately leaves open the question of whether — even if the three essential premises are supported — a mandatory, limited fund class settlement can ever be used to resolve tort claims. Id. at 844, 119 S.Ct. at 2314.
Judge Proctor concluded that Juris's argument that the Inamed settlement class was erroneously certified under Rule 23(b)(1)(B) amounted to an improper basis for seeking relief under Rule 60. He expressly held that Juris's attack on the certification order was "foreclosed as a matter of law," because "a collateral attack, such as one launched through Rule 60(b) proceedings, is not a vehicle for subsequently correcting past errors of law, which undoubtedly includes a conclusion as to certification under Rule 23(b)." District Court order, Docket No. 303 at 45. Stated otherwise, Juris's Rule 23 contentions were not cognizable due process arguments available to an absent plaintiff collaterally attacking a prior class judgment. Judge Proctor then proceeded to explain: "But even if Juris were able to contest Judge Pointer's conclusions of law, the
On appeal, Juris argues that Judge Proctor's alternative conclusion — that the Inamed settlement possesses the presumptively necessary characteristics of a limited fund — is off the mark. She asserts that, if anything, Judge Pointer should have certified the class under Rule 23(b)(3), as opposed to 23(b)(1)(B). Significantly, however, Juris has not challenged, or even acknowledged, Judge Proctor's holding that this line of argument is foreclosed as a matter of law by the doctrine of res judicata. Allergan claims that Juris has therefore waived any argument on this issue, and we agree. In the absence of any argument to the contrary, we will not disturb the district court's holding that Juris's position with respect to the propriety of Judge Pointer's final, unappealed class certification presented an improper basis for collateral attack.
Thus, our primary holding in this Part II.D is that, by failing to challenge Judge Proctor's res judicata holding on appeal, Juris has abandoned any challenge to the propriety of the Rule 23(b)(1)(B) certification by Judge Pointer. See Sepulveda v. U.S. Attorney Gen., 401 F.3d 1226, 1228 n. 2 (11th Cir.2005) ("When an appellant fails to offer argument on an issue, that issue is abandoned."). However, even in the absence of Juris's waiver, we would affirm Judge Proctor's res judicata conclusion. There is considerable support for the proposition that a collateral attack is not a vehicle for an absent class member to retrospectively challenge the propriety of class certification under the Federal Rules of Civil Procedure. Put otherwise, an absent class member cannot escape the res judicata effect of a prior judgment by demonstrating — without more — that certification was in error or that the class should have been certified under a different subsection of Rule 23.
"[C]ertain fundamental defects — lack of subject matter jurisdiction, personal jurisdiction, or due process — in a prior litigation will render the judgment void and without legal effect ...." Note, Collateral Attack on the Binding Effect of Class Action Judgment, 87 Harv. L.Rev. 589, 593-94 (1974). However, "the res judicata consequences of a final, unappealed judgment on the merits [are not] altered by the fact that the judgment may have been wrong or rested on a legal principle subsequently overruled in another case." Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 398, 101 S.Ct. 2424, 2428, 69 L.Ed.2d 103 (1981). Therefore, an absent class member will not typically be able to collaterally attack a prior judgment by arguing that there was an error in the certification.
Finally, Juris argues that the Anti-Injunction Act barred the district court from enjoining her California state court action. The Anti-Injunction Act prohibits a federal court from enjoining state court proceedings "except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments." 28 U.S.C. § 2283. We hold that the district court's injunction in this case was permissible because it was necessary "in aid of its jurisdiction" and "to protect or effectuate its judgments."
The "necessary in aid of" jurisdiction exception to the ban on federal
In re Ford Truck Sales, 471 F.3d 1233, 1250-51 (11th Cir.2006).
Importantly, federal courts have recognized a narrow exception to this general rule, allowing the "in aid of its jurisdiction" exception to be used "to enjoin parallel state class action proceedings that might jeopardize a complex federal settlement and state in personam proceedings that threaten to make complex multidistrict litigation unmanageable." 17A Moore's Federal Practice § 121.07 (3d ed.2010). For example, in Battle v. Liberty National Life Insurance Co., 877 F.2d 877 (11th Cir.1989), we held that a district court that had issued a final judgment in a complex and lengthy class action, and expressly retained jurisdiction over the settlement, properly enjoined a subsequent state court suit involving substantially similar claims. We stated that "it ma[de] sense to consider th[e] case, involving years of litigation and mountains of paperwork, as similar to a res to be administered," and that the "lengthy, complicated litigation [wa]s the `virtual equivalent of a res.'" Id. at 882 (quotations and citation omitted). We reasoned that "[a]ny state court judgment would destroy the settlement worked out over seven years, nullify this court's work in refining its Final Judgment over the last ten years, add substantial confusion in the minds of a large segment of the state's population, and subject the parties to added expense and conflicting orders." Id. (quotations and citation omitted); see also Wesch v. Folsom, 6 F.3d 1465, 1470-71 (11th Cir.1993) (affirming injunction and finding that "virtual equivalent of a res to be administered" existed where the district court had "invested a great deal of time and other resources in the arduous task of reapportioning Alabama's congressional districts").
The lengthy, complicated litigation at issue in this case was likewise the "virtual equivalent of a res." The district court has spent countless hours managing the highly complex multidistrict breast implant litigation, and it was only after years of extended settlement negotiations that the parties were able to resolve the claims of over 40,000 Inamed breast implant recipients. Moreover, the district court, like that in Battle, retained exclusive jurisdiction to review, interpret, and enforce the Inamed class settlement. The district court has continually exercised that jurisdiction in interpreting the Inamed settlement agreement and supervising the escrow agent charged with administering the settlement fund. Admittedly, "Battle and Wesch offer little guidance as to how the parallel federal and state proceedings were sufficiently similar to an in rem proceeding so as to warrant an injunction." Burr & Forman v. Blair, 470 F.3d 1019, 1032-33 (11th Cir.2006). However, we agree with Judge Proctor that this "paradigmatically
The "to protect or effectuate" judgments exception to the Anti-Injunction Act, referred to as the "relitigation exception," is "appropriate where the state law claims would be precluded by the doctrine of res judicata." Burr & Forman, 470 F.3d at 1029-30 (citation omitted). "In a sense, the relitigation exception empowers a federal court to be the final arbiter of the res judicata effects of its own judgments because it allows a litigant to seek an injunction from the federal court rather than arguing the res judicata defense in the state court." Id. at 1030 n. 30; see also Wesch, 6 F.3d at 1471 ("[The relitigation exception] is essentially a res judicata concept designed to prevent issues that have already been tried in federal court from being relitigated in state court.").
Without elaboration or citation to authority, Juris makes a conclusory assertion that the relitigation exception cannot apply because the Inamed class action did not result in a decision on the merits.
We emphasize the collateral posture of this case. Judge Pointer's order certifying the Inamed settlement class as a limited fund class under Rule 23(b)(1)(B) is not before us on direct appeal. The issue is not whether we would on direct appeal vacate certification under the strict Rule 23 guidelines later announced in Ortiz or whether Rule 23(b)(1)(B) should be used to settle aggregated tort claims in a post-Ortiz
Upon review, we conclude that the 1999 Inamed class settlement precludes Juris from bringing her action against Allergan. Accordingly, we affirm.
AFFIRMED.
Notably, the former Fifth Circuit's binding decision in Gonzales may have already decided this issue, as it apparently prescribes a broad, merits-based collateral review. See 474 F.2d at 72 (noting that the second, reviewing court must engage in a collateral review of the class action court's initial determination that the class representatives would be adequate). Regardless, to the extent it presents an open question, we need not decide the proper scope of collateral review available to Juris in this case. As will be demonstrated below, even assuming arguendo it was proper for Judge Proctor to revisit the underlying merits of each of Juris's arguments, we would affirm his holding that Juris has failed to demonstrate a violation of her due process rights.
We need not in this case decide whether Judge Proctor's reasoning, and his distinction of Amchem, was sound, because Juris has not fairly raised the issue on appeal. Notwithstanding her briefs in the court below and the fact that she discussed this potential notice issue during oral argument, Juris did not sufficiently develop this argument in her appellate briefs and has therefore abandoned it. See McFarlin v. Conseco Servs., LLC, 381 F.3d 1251, 1263 (11th Cir.2004) ("A party is not allowed to raise at oral argument a new issue for review."); Marek v. Singletary, 62 F.3d 1295, 1298 n. 2 (11th Cir.1995) ("Issues not clearly raised in the briefs are considered abandoned.").
We likewise reject Juris's argument that representation was inadequate because nobody filed a Rule 60 motion to set aside the limited fund certification based on Inamed's 1998 10-K, which she contends undermined Inamed's pleas of poverty. Judge Pointer overruled an objection on similar grounds, and Judge Proctor made a reasonable finding of fact that Inamed's post-settlement economic rebound was due to the prospect that the company would be relieved from its overwhelming debt burden and its otherwise undisputed path towards insolvency. On appeal, Juris does not even attempt to challenge Judge Proctor's factual finding. We agree with Judge Proctor that "a failure to pursue an otherwise insubstantial question of fact or law does not amount to inadequate representation." District Court order, Docket No. 303 at 90.
Juris's reliance on In re Telectronics Pacing Systems, Inc., 221 F.3d 870 (6th Cir.2000), is also unavailing. In that case, the Sixth Circuit reversed a Rule 23(b)(1)(B) certification because the limited fund settlement at issue suffered from some of the same deficiencies as that in Ortiz. Most notably, there was no limited fund because the district court excluded the value of two potentially liable parent companies in calculating the "fund available" for satisfying the claims. Id. at 878. Although the named defendant alone did not have assets sufficient to cover the expected tort liability, the settlement released the parent companies who would have been "able to bear the expense of litigation and pay damages if found liable." Id. In the case at bar, there were no insurance assets and there were no parent companies. Inamed's assets constituted the entirety of the fund available to satisfy the claims, and the fund at issue was limited independently of any agreement by the parties. Finally, Juris's citations to Jefferson v. Ingersoll International Inc., 195 F.3d 894 (7th Cir.1999), and Molski v. Gleich, 318 F.3d 937 (9th Cir.2003), are likewise unpersuasive. Those cases arose in the context of direct appeals of class certification, and each involved a Rule 23(b)(2) class action, not a limited fund action certified pursuant to 23(b)(1)(B). Jefferson, 195 F.3d at 897; Molski, 318 F.3d at 943.
Second, commentators have suggested that all class members may have a due process right to opt out that is grounded in the right to individual control of litigation. Under this view of the opt-out right, absent members may have a due process right to exclude themselves from the class even in situations, such as the instant case, where the court's adjudicatory jurisdiction over them is not subject to question. See Miller et al., supra, at 54 ("Another way to analyze Shutts is a decision protecting the right to opt out for its own sake. In this view, the right to opt out not only is a check against distant forum abuse, but it also protects the claimant's right to control her litigation."); Cottreau, supra, at 510 (arguing that "due process requires opt out rights in some class actions where no jurisdictional concerns exist"). Juris briefly mentioned this alternative opt-out argument before Judge Proctor, although even there her suggestion was sufficiently vague and unaccompanied by any reasoning or authority that it is doubtful the argument was preserved. In any event, her position on appeal can only be understood as arguing that Judge Pointer's "court lacked personal jurisdiction over out-of-state class members, not the different and broader question of whether, [even] if a state has jurisdiction over the plaintiffs, due process requires that all class members have the right to opt out of the class and settlement agreement." Adams, 520 U.S. at 88-89, 117 S.Ct. at 1030. Because the alternative opt-out argument has not been fairly raised on appeal, we deem it abandoned and decline to entertain it. See Marek v. Singletary, 62 F.3d 1295, 1298 n. 2 (11th Cir.1995).
In any event, although the Joint Eastern court vacated certification on other grounds, it actually concluded that "the need to insist on bankruptcy law protections" was not so great as to prevent certification of a limited fund settlement class under the circumstances. Id. at 739-40. We also note that, in Ortiz, the Supreme Court expressly stated that "there is no inherent conflict between a limited fund class action under Rule 23(b)(1)(B) and the Bankruptcy Code." 527 U.S. at 860 n. 34, 119 S.Ct. at 2321 n. 34.
Ortiz first requires that there be a demonstration that the fund, "set definitively at [its] maximum," is inadequate "to pay all the claims." 527 U.S. at 838, 119 S.Ct. at 2311. Unlike the facts of Ortiz, Judge Pointer undertook a careful analysis of both the magnitude of the claims and the value and adequacy of the entirety of the resources to pay those claims. Because there was no insurance coverage, the only resources available to pay claims were Inamed's own assets. In contrast with Ortiz, external factors here — not the mere agreement of the parties — imposed the limit on the size of the fund. The fund was limited by the net value of the entirety of the assets of Inamed. As summarized in Part I.A and Part I.C, supra, Judge Pointer's careful findings of fact established that the $31.5 million settlement fund was substantially greater than the value of the entirety of the net assets of Inamed which could have been available to pay claims in the absence of certification, and that the magnitude of the claims of the class members far exceeded that value. Moreover, notwithstanding the absence of a serious challenge to these crucial facts, Judge Proctor carefully reviewed the evidence and Judge Pointer's findings. Judge Proctor similarly found that the $31.5 million fund was the maximum amount that could have been available for the claimants, and that the claims of the class far exceeded any possible recovery. On appeal, Juris fails to challenge these crucial fact findings by Judge Pointer and Judge Proctor, and she has never denied that the value of the outstanding tort claims vastly exceeded the assets available to meet the claims.
The second defect identified in Ortiz was the fact that the limited fund settlement failed to ensure "equity among the members of the class." 527 U.S. at 854, 119 S.Ct. at 2318. There are two issues here, "the inclusiveness of the class and the fairness of distributions to those within it." Id. In Ortiz, the settlement was improper in part because class counsel had agreed to "exclude what could turn out to be as much as a third of the claimants that... might eventually be involved." Id. at 854, 119 S.Ct. at 2319. There has been no suggestion that any such exclusions occurred with respect to the instant settlement class. The Ortiz limited fund class was also improper because the lack of structural protections — i.e., "independent representation as for subclasses with conflicting interests" — ran contrary to the equitable obligation within the limited fund rationale. Id. at 855-57, 119 S.Ct. at 2319-20. Here, as discussed in Part II.C.2, supra, the proceedings before Judge Pointer were protected by the functional equivalent of subclasses, and these "procedures... resolve[d] the difficult issues of treating ... differently situated claimants with fairness as among themselves." Ortiz, 527 U.S. at 856, 119 S.Ct. at 2319. Juris can hardly make any challenge to the equity among the class members, particularly in light of the fact that she was a mere future claimant at the time, and future claimants shared with the currently injured on a pro rata basis.
The final feature of the settlement in Ortiz that departed from the historical model was "the ultimate provision for a fund smaller than the assets understood ... to be available." Id. at 859, 119 S.Ct. at 2321. The Court stopped short of deciding whether this fact would alone be fatal, but it observed that the defendant contributed only $500,000 of its own assets, retaining nearly all of its net worth, with an estimated value of around $235 million. Id. at 859-61, 119 S.Ct. at 2321-22. The bulk of the settlement recovery was provided for by the company's insurers. Id. Importantly, Ortiz leaves open how close to insolvency a limited fund defendant would need to be brought as a condition of certification, id. at 860 n. 34, 119 S.Ct. at 2321 n. 34, and also the extent to which saved transaction costs and expenses "that would never have gone into a class member's pocket in the absence of settlement" may be credited to the defendant as an incentive to settle, id. at 860-61, 119 S.Ct. at 2321-22. Here, it is significant that Judge Proctor found that, beyond the $31.5 million loaned by Inamed's senior noteholders, the company had almost no other assets to contribute to the settlement, and the entirety of the settlement fund was earmarked exclusively for the class. Additionally, Judge Pointer found and Judge Proctor confirmed that Inamed had a negative net worth, net liquidation value of essentially zero, and no resources to pay claims. As noted above in note 14, supra, and in stark contrast with Ortiz, it is undisputed that the recovery fund ultimately provided for the class was greater than the assets understood to be available.
Thus, although the issue is not before us, the instant certification would seem to fall within the dicta of Ortiz: "[I]f Fibreboard's own assets would not have been enough to pay the insurance shortfall plus any claims in excess of the policy limits, the projected insolvency of the insurers and Fibreboard would have indicated a truly limited fund." 527 U.S. at 853, 119 S.Ct. at 2318. We note also that the record here reflects that the settlement was reached by arms-length dealings. Moreover, the instant case may be unique in that there can be no concern about conflicts of interest on the part of class counsel by virtue of the potential gigantic fees emphasized by the Ortiz court. Id. at 852 n. 30, 119 S.Ct. at 2317 n. 30. Judge Proctor found that, "unlike Ortiz, class counsel in this case received their fees from a separate account, funded years earlier, by a coalition of breast implant manufacturers." District Court order, Docket No. 303 at 54. There is also no issue here regarding a defendant-favorable forum selection; the forum was carefully selected by the Judicial Panel on Multidistrict Litigation.
However, even assuming arguendo that a court on direct review would, after Ortiz, be reluctant to approve certification of a limited fund class on these facts, that could provide no comfort to Juris. In the collateral challenge posture of this case, Juris must demonstrate more than the failure to satisfy the requirements of Rule 23(b)(1)(B). She must demonstrate that her own due process rights were violated. In the preceding sections of this opinion, we have addressed each argument asserted by Juris to support a due process violation, and concluded that each argument is without merit. In addition, the particular facts of this case suggest the very opposite of a due process violation; they indicate fundamental fairness. It is apparent that there was adequate notice, that class objectors had ample opportunity to make — and did make — all the arguments Juris now raises, that future claimants like Juris received adequate representation, and finally, it is apparent that the class did in fact receive a greater recovery than was possible with any other available option.
