ROSENTHAL, District Judge:
This is an appeal from the dismissal of a putative class action filed in a California federal district court. The dismissal was based on a Massachusetts federal district court's final judgment certifying a nationwide class and approving a class settlement. A class member who appeared
The California defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). The motion was based on a covenant not to sue contained in the settlement and final judgment entered in the Massachusetts case. Under that provision, the class members, including the member who filed the California suit as the named plaintiff, not only released their claims against the Massachusetts defendants but also agreed not to sue "any other person seeking to establish liability based, in whole or in part," on the claims released.
The California defendants argued that the covenant not to sue in the Massachusetts settlement agreement and final judgment precluded the California action. The district court held that the covenant was enforceable against the named plaintiff in the California case, declined to appoint or allow a new class representative because no class had been certified, did not decide whether the covenant was enforceable against the absent members of the putative class, and dismissed. The named plaintiff appealed. We affirm.
The named plaintiff filing the California case is Skilstaf, Inc., an Alabama payroll-service company that self-funds a prescription-drug plan for its employees. Skilstaf was a member of the class the Massachusetts district court certified in New England Carpenters Health Benefits Fund v. First DataBank, Inc. & McKesson Corp.
The defendants in the Massachusetts case were McKesson Corporation, a wholesale prescription-drug distributor that also owns pharmacy-related businesses, and First DataBank, a publisher of information about prescription drugs. Wholesalers such as McKesson sell prescription drugs to retail pharmacies and other purchasers. Pharmacies in turn mark up the price in selling to consumers. If the consumers are insured, the insurer's reimbursement payment is typically based on average wholesale prices (AWPs) published by, among others, First DataBank. Third-party payors typically contract to reimburse retail pharmacies at a discount from the published AWP figures. The complaint in the Massachusetts suit alleged that the third-party payors and the individual consumers paid improperly inflated prices for many brand-name prescription drugs based on AWPs published by First DataBank. The plaintiffs in the Massachusetts case alleged that beginning in 2001, McKesson and First DataBank conspired to publish AWPs that used a 25% markup for drugs that historically had only 20% markups. The complaint alleged
In March 2008, after three years of litigation, the Massachusetts court presiding over New England Carpenters certified the third-party payor and consumer classes described above.
McKesson ultimately agreed to pay $350 million to settle the claims, consisting of $288 million to the class net of fees and expenses.
(emphasis added).
The settlement agreement defined "Released Parties" as:
The settlement agreement defined "Released Claims" as:
The settlement notice sent to class members in April 2009 set out the covenant not to sue with other provisions of the settlement agreement. But the notice did not emphasize that the members were giving up claims against "any other person" along with the claims against McKesson and affiliated entities. In the section entitled "What claims am I giving up?," the notice quoted the agreement's release clause (including the "any other person" language) and its definition of "Released Claims." The quoted section was preceded by a "plain language" explanation that stated:
In the section entitled "What entities am I releasing?," the settlement notice stated that the "Released Entities" included "McKesson Corporation, its parent companies, subsidiaries, and affiliates, and their past, present and future officers, directors, trustees, employees, agents, attorneys, shareholders, predecessors, successors, and assigns." The settlement notice stated that the "Released Claims do not include claims against any manufacturer," but the notice did not exclude any other category of potential defendants. The settlement notice provided information about how to object but did not extend a second opt-out right to the class members.
In April 2009, after the settlement notice was sent, Skilstaf's counsel wrote to McKesson's counsel asking whether the "or any other person" language was intended to release "class members' claims against any entity other than McKesson, such as retail pharmacies." McKesson's counsel replied in an email dated April 30, 2009 that "[t]he release was framed broadly, as is customary in class action settlements, but McKesson does not intend the release to extend to claims against retail pharmacies."
In June 2009, Skilstaf filed suit in the Northern District of California against nine retail chain pharmacies: Albertson's, CVS, Kroger, Longs, Rite Aid, Safeway, Supervalu, Walgreens, and Wal-Mart. Skilstaf did not sue McKesson or First DataBank. Skilstaf alleged that these retail pharmacies had either joined in, or profited from, or both, the conspiracy between First DataBank and McKesson to inflate the AWPs for many brand-name prescription drugs. In the California suit, as in the Massachusetts case, Skilstaf asserted a RICO conspiracy. In California, Skilstaf also asserted a common-law claim for unjust enrichment and money had and received, based on the profits the retail pharmacies had obtained as a result of the allegedly inflated AWPs. A substantial part of the California complaint was cut-and-pasted from the Massachusetts complaint.
At the fairness hearing, Skilstaf appeared through counsel to argue its limited objection and alternative motion to strike or clarify. Skilstaf asked the Massachusetts district court to rule that the settlement agreement did not release claims against entities other than McKesson, including the retail chain pharmacies sued in the California case. Skilstaf emphasized that the notices to the class members did not explicitly state that remaining in the class or failing to object to the settlement precluded suing not only McKesson but also "any other person" based on the claims released. As a result, according to Skilstaf, retaining the "any other person" covenant not to sue violated due process.
In response, McKesson urged the district court to approve the settlement as fair and reasonable and consistent with due process. McKesson argued that appointed class counsel, as well as independent counsel for large groups of third-party payor class members, and many absent members, were fully aware of—and had not objected to—the "or any other person" provision in the settlement agreement. To the contrary, because the settlement terms were so generous, class counsel, independent counsel, and some absent class members had expressed enthusiastic support with full awareness of the covenant not to sue. Besides the limited objection from Skilstaf, no one had objected to this provision. Indeed, there were only seven objections filed to any part of the settlement, a .2% objection rate. One of these objections had already been withdrawn by the fairness hearing and three addressed only attorney's fees.
During the fairness hearing, McKesson's counsel stated that "30 percent of [the third-party payor class] . . . actually put in a brief after the Skilstaf objection was filed saying, `No. We want this settlement to go through.'" Independent counsel representing third-party payor members (other than Skilstaf) told the court that "[t]he fact that this would quiet any and all litigation that they could bring in connection with the violations alleged in the complaint that was brought before this Court is well known, well understood. . . . What is obvious to me from my communications with many third-party payors is, they're very eager to have this settlement close and collect their share of the $288 million."
McKesson also argued that its position that the "or any other person" provision excluded related claims against other entities was consistent with its counsel's April 30, 2009 email to Skilstaf. The settlement contained a release that extinguished the claims against McKesson and a covenant not to sue that did not extinguish related claims against "any other person" but would preclude suing to hold "any other person" liable for such claims. McKesson argued that the distinction between a release—which extinguished claims—and a
At the fairness hearing, the Massachusetts district judge initially expressed surprise that the settlement agreement contained language barring subsequent related claims against other entities. The judge expressed concern that this point had not been clearly stated in the notice and raised the possibility that some members might have wanted to opt out of a settlement class bound by that provision. The judge emphasized, however, that the settlement was "fabulous" and that it would be a shame "to see it scuttled." The judge noted that Skilstaf's limited and only objection was to the four words—"or any other person"—and not to any aspect of the settlement with McKesson itself. The judge noted that only Skilstaf had objected to the "or any other person" settlement term (or to any other term besides a few objections to fees); that sending additional notice to the entire class would cause significant delay; and that the only lawsuit filed against entities other than McKesson was the Skilstaf complaint in California, which could well be barred by limitations. The Massachusetts district court denied Skilstaf's limited objection and alternative motion to strike, ruling that any due process concern relating to Skilstaf was best addressed by allowing Skilstaf a second opportunity to opt out from the settlement class.
Skilstaf declined to opt out. Instead, Skilstaf moved for reconsideration of the court's order approving the settlement. Skilstaf then withdrew its objection "contingent on the entry of a final judgment substantially in the form" the parties had negotiated and submitted to the court. The final judgment, as negotiated by the parties and approved by the court, included the following:
Skilstaf had unsuccessfully sought language stating "[n]otwithstanding the foregoing, nothing herein shall preclude the court in Skilstaf, Inc. v. CVS Caremark, Corp., 09-CV-2514-SI (N.D.Cal.) from determining the enforceability of applicability of the `any other person' language in Paragraph 15 of the Settlement Agreement," without the prefatory clause "[t]o the extent otherwise permitted by law." Skilstaf agreed to the language that included the prefatory clause. This language was included in the Massachusetts final judgment.
Shortly after the final judgment was entered, another member of the Massachusetts class, Health Management Associates, Inc. ("HMA"), moved for relief from the judgment under Federal Rule of Civil Procedure 60(b) so that it too could pursue claims against retail pharmacies. HMA
The settlement proceeds were distributed and Skilstaf collected its share of the $288 million. The focus then shifted to the California case that Skilstaf filed as the named plaintiff seeking to represent a nationwide class pursuing the same RICO claims that had been asserted in the Massachusetts case but against different defendants. Instead of suing McKesson and First DataBank, Skilstaf sued retail pharmacies that had contracted with McKesson and had used the First DataBank information. The complaint Skilstaf filed in the Northern District of California alleged that the nine retail-pharmacy defendants violated RICO by conspiring with McKesson and First DataBank to inflate AWPs for the same prescription drugs that were at issue in the Massachusetts case, or, alternatively, that the pharmacies were unjustly enriched by McKesson and First DataBank's conspiracy. Skilstaf sued on behalf of a nationwide class of third-party payors, part of the same class that had been certified in the Massachusetts case.
The California district court dismissed Skilstaf's claims on the basis that they were precluded by the covenant not to sue that the Massachusetts court had approved as part of the settlement agreement in New England Carpenters and included in the final judgment. The California court
The court also rejected Skilstaf's request to substitute another class representative because no class had been certified. Finally, the court rejected Skilstaf's request for additional discovery on "the true intent of the parties to the . . . settlement agreement." The court reasoned that the "course of proceedings" in the Massachusetts case made it clear that McKesson had intended to bar all future suits and there was no indication that class counsel had intended something different.
This appeal followed.
We review de novo the district court's grant of a motion to dismiss under Rule 12(b)(6), accepting all factual allegations in the complaint as true and construing them in the light most favorable to the nonmoving party. Newdow v. Lefevre, 598 F.3d 638, 642 (9th Cir.2010). We also review de novo a district court's interpretation of a consent judgment. Jeff D. v. Andrus, 899 F.2d 753, 759 (9th Cir.1989).
Skilstaf raises three arguments on appeal. First, Skilstaf argues that the district court erred by dismissing the case on the pleadings without allowing discovery. Skilstaf contends that California law on contract interpretation mandates discovery when a party claims that extrinsic evidence makes a contract ambiguous; when third parties—like the retail-pharmacy defendants—seek to benefit from a contract; or when a party asserts the defense of mutual mistake to the enforcement of a contract. Second, Skilstaf argues that by limiting the due process analysis to the issue of whether the covenant not to sue was enforceable against Skilstaf, the district court failed to provide what the final judgment entered in New England Carpenters promised: the right to have the California district court determine the enforceability of the covenant not to sue against all members of the Massachusetts class, not just Skilstaf. And third, Skilstaf argues that even if the district court properly limited its due process analysis to whether the covenant not to sue was enforceable against Skilstaf, due process was not met merely by providing Skilstaf, the objector, with a second opt-out opportunity. Each argument is addressed below.
Under California law, "`[t]he fundamental goal of contract interpretation
There is no ambiguity in the meaning of the "or any other person" provision in the New England Carpenters settlement agreement and final judgment. The provision bars a "Releaser" from later
Skilstaf relies on extrinsic evidence that was the subject of judicial notice in the California court to argue that the covenant not to sue the Massachusetts court approved in the New England Carpenters case is ambiguous.
The fact that the Massachusetts district court judge initially expressed surprise and concern over the presence of the "or any other person" provision in the proposed class settlement agreement does not show that those who drafted and signed the agreement did not intend to include such a provision or misunderstood what it meant. The Massachusetts court's orders interpreting and applying this provision are consistent with the California district court's later interpretation and application. The Massachusetts court declined to strike or clarify the language despite initially expressing concern about it during the fairness hearing. The court approved the settlement agreement and entered final judgment. The court later denied HMA's motion seeking relief from the final judgment.
Skilstaf, citing this circuit's unpublished decision in Atlanta Cancer Care, P.C. v. Amgen, Inc., argues that it was reversible error to "`dismiss on the pleadings when one party claims that extrinsic evidence renders the contract ambiguous.'" 359 Fed.Appx. 714, 716 (9th Cir. 2009) (quoting A. Kemp Fisheries, 852 F.2d at 497 n. 2). A party's assertion of ambiguity does not require the district court to allow additional opportunities to find or present extrinsic evidence if the court considers the contract language and the evidence the parties have presented and concludes that the language is reasonably susceptible to only one interpretation. See Hervey v. Mercury Cas. Co., 185 Cal.App.4th 954, 110 Cal.Rptr.3d 890, 895 (2010) ("Although parol evidence may be admissible to determine whether the terms of a contract are ambiguous, it is not admissible if it contradicts a clear and explicit [contract] provision." (citations omitted)). That conclusion can be reached on a motion for summary judgment or, as here, on a motion to dismiss if the evidence can properly be considered under Rule 12(b)(6). See id. at 896-97 (holding that the trial court properly dismissed, without leave to amend, the plaintiff's class-action complaint by taking judicial notice of contract terms and concluding they were not reasonably susceptible to the plaintiff's proposed interpretation).
Skilstaf asserts that the defendants are essentially claiming to be third-party beneficiaries of the settlement agreement. Skilstaf's argument that "California law . . . requires that courts allow discovery of extrinsic evidence in cases where . . . a third party seeks to show it was an intended beneficiary of a contract" is unpersuasive. Skilstaf relies on the California appellate court's statement in Neverkovec v. Fredericks, 74 Cal.App.4th 337, 87 Cal.Rptr.2d 856, 869 (1999), that "California contract law requires a third party to show he was an intended beneficiary of a general release and permits extrinsic evidence of the contracting parties' intent and the circumstances in which the agreement was executed." Neverkovec does not support Skilstaf's argument that whenever a third party claims it was an intended beneficiary of a contract, the opposing party is entitled to discovery of possible extrinsic evidence on that claim. Instead, Neverkovec states that "[r]elease agreements are governed by the generally applicable law of contracts." Id. at 865. In the present case, the record, including the evidence subject to judicial notice, made it clear that the retail pharmacies were intended third-party beneficiaries of the settlement agreement to the extent necessary to protect McKesson from facing the same exposure through claims for indemnity that it had paid generously in settlement to avoid. Under California law, Skilstaf was not entitled to discovery of additional extrinsic evidence because the retail pharmacies asserted that the settlement agreement approved in the Massachusetts court protected them from the claims Skilstaf asserted in the California court.
Finally, Skilstaf argues that "[d]iscovery of extrinsic evidence is also required under California law when a party asserts the defense of mutual mistake." Skilstaf relies on the California Supreme Court's statement in Hess v. Ford Motor Co., that to determine whether a contract clause was included by mistake, "[e]xtrinsic evidence is necessary because the court must divine the true intentions of the contracting parties and determine whether the written agreement accurately represents those intentions." 27 Cal.4th 516, 117 Cal.Rptr.2d 220, 41 P.3d 46, 52 (2002). The Hess court did not hold that a party is entitled to discovery any or every time it asserts mutual mistake as a contract defense. Instead, the court stated that parol evidence may be required to determine the defense on the merits. Id., 117 Cal.Rptr.2d 220, 41 P.3d at 51-53.
In the present case, the district court considered the evidence the parties presented and concluded that the covenant not to sue was intended to bar claims against third parties, such as the retail pharmacies, that were related to the claims released in the New England Carpenters case. The evidence amply supports that conclusion. The district court did not err in its application of California law.
We agree with the district court that enforcing the New England Carpenters
Relying on Churchill Village, L.L.C. v. General Electric, 361 F.3d 566 (9th Cir. 2004), Skilstaf argues that due process is not satisfied when a class action defendant provides only objectors—rather than the entire class—with a second opt-out opportunity. In Churchill, we considered whether an objecting class member who had an opt-out opportunity could appeal the district court's denial of its objection under the Supreme Court's decision in Devlin v. Scardelletti, 536 U.S. 1, 122 S.Ct. 2005, 153 L.Ed.2d 27 (2002). In Devlin, the Supreme Court considered whether a non-named, absent class member who objects to a settlement, but who cannot opt out because the class action was certified under Rule 23(b)(1), must intervene to appeal an objection overruled by the district court. The Supreme Court held that intervention is not required. The Court stated:
Id. at 10-11, 122 S.Ct. 2005.
In Churchill, we addressed whether an objecting class member who did have an opt-out right could remain in the class and still appeal. Rejecting the argument that because an objecting class member could opt out, it had no basis to appeal, we stated:
361 F.3d at 572.
Skilstaf argues that just as we rejected the argument in Churchill "that the right
Skilstaf's argument proves too much. The California court's ruling that the New England Carpenters settlement agreement is enforceable against Skilstaf did not address whether enforcing that agreement against the nonnamed members of the putative class of third-party payors Skilstaf sought to represent would violate their due process rights. Because the unnamed members of this putative class are not bound by the decision to dismiss Skilstaf's claims, see Smith v. Bayer Corp., ___ U.S. ___, 131 S.Ct. 2368, 2381, 180 L.Ed.2d 341 (2011) (stating that a class action "with binding effect on nonparties[ ] can come about in federal courts in just one way— through the procedure set out in Rule 23"), any ability they have to challenge the applicability or enforceability of the covenant not to sue—if and when they sue the retail pharmacies—is unaffected. The district court's ruling did not create the risk that the Massachusetts class settlement will escape "proper review," as Skilstaf contends.
Skilstaf argues that the California district court erred by limiting its due process analysis to whether the covenant not to sue was enforceable against Skilstaf. Skilstaf contends that the provision it negotiated in the Massachusetts final judgment required the California district court to determine the enforceability of the covenant not to sue against all the third-party payors who had been members of the Massachusetts certified class and who made up the putative class Skilstaf sought to represent in California. That is so, Skilstaf asserts, because one of its contentions before the Massachusetts court was that the covenant not to sue was unenforceable against the New England Carpenters class, not just against Skilstaf.
The Massachusetts court's final judgment did not require the California court to consider whether the covenant not to sue was enforceable against the nonnamed members of the putative uncertified class, who were in a different position from Skilstaf because they did not object, appear in the Massachusetts case, or receive and reject a second opt-out opportunity. The Massachusetts court's final judgment states that Skilstaf could challenge the covenant not to sue in another court. The California district court considered Skilstaf's due process challenge to the covenant not to sue. Once the California district court determined that the covenant not to sue was enforceable against Skilstaf, the Massachusetts judgment did not require the district court to decide more. Before the California district court, Skilstaf argued that, even if the covenant not to sue was enforceable against it, the district
The provision in the Massachusetts judgment Skilstaf negotiated with McKesson and with the New England Carpenters class counsel supports the result the California court reached. The provision states that Skilstaf may raise before another court the contentions it raised in the Massachusetts court "[t]o the extent otherwise permitted by law." This includes the law of issue preclusion. Skilstaf was not "permitted by law" to relitigate issues that had already been decided in Massachusetts and to which issue preclusion applied.
"Issue preclusion bars relitigation of issues adjudicated in an earlier proceeding if three requirements are met: `(1) the issue necessarily decided at the previous proceeding is identical to the one which is sought to be relitigated; (2) the first proceeding ended with a final judgment on the merits; and (3) the party against whom collateral estoppel is asserted was a party or in privity with a party at the first proceeding.'" Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 (9th Cir.2006) (quoting Kourtis v. Cameron, 419 F.3d 989, 994 (9th Cir.2005), abrogated by Taylor v. Sturgell, 553 U.S. 880, 904, 128 S.Ct. 2161, 171 L.Ed.2d 155 (2008)). We found these requirements met in Reyn's Pasta, for reasons that are instructive here.
In Reyn's Pasta, class members who appeared through counsel and objected during a class-action settlement hearing in the Eastern District of New York attempted to collaterally attack the release in the settlement approved in that case in a subsequent suit filed in the Northern District of California. Id. at 745. The collateral attack was based on the same objections raised at the settlement fairness hearing in the Eastern District New York. Id. at 746 n. 6. In Reyn's Pasta, the plaintiffs sued Visa, MasterCard, and their member banks in the Northern District of California, alleging that they had violated the federal antitrust statutes by fixing the "interchange rate." Id. at 743-44. This rate is the difference between the price paid by a Visa or MasterCard member bank for title to goods purchased by consumers and the price paid by consumers. Id. at 744 n. 3. The Reyn's Pasta plaintiffs were also class members in a separate action brought by Wal-Mart and other retailers in the Eastern District of New York against Visa and MasterCard, In re Visa Check/Mastermoney Antitrust Litig., 297 F.Supp.2d 503 (E.D.N.Y.2003) (the "Wal-Mart class action"). Reyn's Pasta, 442 F.3d at 743-44. In the Wal-Mart classaction suit, the complaint alleged that Visa and MasterCard obtained excessive "discount fees"—the difference between the price charged to a consumer and the price Visa or MasterCard paid the merchant— "by `tying' their debit cards to their credit cards and conspiring to monopolize the debit-card market." Id. at 744 n. 3, 745. The Wal-Mart suit settled. The settlement agreements the court in the Eastern District of New York approved included releases "purport[ing] to absolve Visa, MasterCard, and the [member banks] of all antitrust liability arising out of conduct. . . related to the claims asserted in the Wal-Mart class action." Id. at 745. The Reyn's Pasta plaintiffs appeared at the settlement fairness hearing in the Eastern District of New York and litigated whether the Wal-Mart class-action settlement released the price-fixing claims they had alleged in the Northern District of California.
After the Eastern District of New York entered this ruling and approved the settlement agreement in the Wal-Mart class action, the defendants in the California action argued that the release in the settlement barred that suit. Id. The California district court agreed and dismissed. Id. Affirming the district court, we explained that the elements of issue preclusion— issue identity, party identity or privity, and final judgment—were met: in the Wal-Mart class action, the court had ruled that the release in the settlement agreement applied to the price-fixing claims, the Reyn's Pasta plaintiffs were parties to this decision "by virtue of their membership in the class and appearance through counsel at the fairness hearing," and the New York district court's approval of the settlement was a final judgment on the merits. Id. at 746-47. We also rejected the plaintiffs' argument "against application of issue preclusion solely from the maxim that a court rendering a judgment cannot predetermine its res judicata effects." Id. at 747. We found the maxim inapplicable because the plaintiffs "brought about the Wal-Mart [court's] predetermination of their judgment's preclusive effects by raising the issue in the Wal-Mart litigation as opposed to waiting to attack those judgments in the Northern District of California." Id.
This case is similar to Reyn's Pasta. Skilstaf was a class member in the Massachusetts action and, through counsel, objected to the covenant not to sue in the settlement agreement. Skilstaf's objection clearly raised a due process challenge. Skilstaf argued that "you don't notice [the covenant not to sue] when you read the documents" because it was "buried in the release section of the notice" and was not placed in a separate section. Disagreeing that the settlement notice was inadequate, McKesson argued that the notice "was quite clear" because it quoted the covenant not to sue verbatim. Counsel for the third-party payor class argued that the absent members of that class—the same entities who were members of the putative class Skilstaf sought to represent in California—were fully aware of the covenant not to sue and expressed overwhelming support for the settlement.
Explaining that it did not have the authority to modify the settlement agreement but only to accept or reject it, the Massachusetts district court rejected Skilstaf's preferred solution—striking the "or any other person" language—and raised two possible alternatives. The first was requiring McKesson to send a new settlement notice providing a second opt-out opportunity to all class members, and the second was requiring McKesson to provide a second opt-out opportunity to Skilstaf. The district court rejected the first alternative. It explained that the settlement agreement had been "pretty widely publicized," that no other class member objected to the "any other person" provision in the one-month period since Skilstaf filed its objection, and that requiring McKesson to send a new settlement notice to the entire class would delay and endanger "a fabulous settlement." The district court resolved the due process concern raised by Skilstaf's objection by giving Skilstaf a second opt-out opportunity. Skilstaf declined the opportunity, withdrew its motion to reconsider, and did not appeal. The district judge approved the settlement and entered final judgment.
The elements of issue preclusion are met. First, the Massachusetts district court ruled on Skilstaf's due process challenge to the covenant not to sue. Skilstaf directly challenged the adequacy of the settlement notice at the fairness hearing in
Skilstaf argues that it should not be precluded from relitigating its due process challenge in California because the New England Carpenters final judgment included the negotiated term allowing Skilstaf to challenge the enforceability of the covenant not to sue before another court. Skilstaf contends that in exchange for this ability to raise the challenge in the district court in which its suit against the retail pharmacies was pending, it agreed to withdraw its objection to the covenant not to sue and waived its right to appeal the Massachusetts district court's rejection of the objection and denial of the motion to strike to the First Circuit Court of Appeals. Contrary to Skilstaf's assertion, the Massachusetts final judgment does not limit the preclusive effects of the Massachusetts district court's rulings in this fashion. The provision states that "[t]o the extent otherwise permitted by law, nothing in the [Massachusetts court's order denying Skilstaf's objection to the settlement agreement] precludes Skilstaf from raising the same contentions before another court to determine the enforceability or applicability of the `any other person' language in Paragraph 15 of the Settlement Agreement." If issue preclusion bars Skilstaf's due process challenge, Skilstaf is not "otherwise permitted by law" to raise this "same contention[ ] before another court."
Skilstaf's decision to withdraw its motion asking the district court in Massachusetts to reconsider its denial of Skilstaf's objection to the covenant not to sue in the settlement agreement and to forgo an appeal from the settlement approval and final judgment does not permit Skilstaf to collaterally attack the enforceability of the covenant against it in California. After the Massachusetts district court denied Skilstaf's objection in a written order, Skilstaf filed a motion for reconsideration, reurging its argument that the class members did not receive adequate notice of the covenant not to sue. Skilstaf argued that the "proposed `solution' of allowing only Skilstaf an opportunity to opt out [was] meaningless, as all class members have the due process right to opt-out after receiving adequate notice." Skilstaf withdrew its objection and its motion for reconsideration after it negotiated the language included in the final judgment. Skilstaf then took its share of the settlement proceeds, as did the other members of the third-party payor class. The Massachusetts court's ruling rejecting Skilstaf's objection over its due process argument, based on the facts specific to Skilstaf's role in the litigation, remained in place.
Unlike the Kansas plaintiff in Hesse, Skilstaf appeared through counsel at the Massachusetts fairness hearing, objected to the settlement agreement insofar as it contained the covenant not to sue, specifically challenged the adequacy of the notice with respect to the covenant, and obtained a specific ruling that given the absence of any other objection, given the evidence of widespread knowledge of the covenant, and given class counsel's endorsement of the settlement with full knowledge of the covenant, due process was satisfied by affording Skilstaf a second opt-out opportunity. Skilstaf withdrew its objection to the covenant not to sue and its motion for reconsideration in exchange for language in the final judgment that, as we discussed, did not limit the preclusive effect of issues litigated and decided in the Massachusetts action. Skilstaf does "not get a second bite at the apple to challenge collaterally the same issue" in California. Reyn's Pasta, 442 F.3d at 747.
The district court's decision to dismiss is affirmed.
