Nestle Purina PetCare Company has sought certiorari review from the United States Supreme Court of a Federal District Court’s ability to enjoin parallel state proceedings under the All Writs Act and the Anti-Injunction Act. Nestle Purina PetCare Co. v. Curts, 2015 WL 1250861 (U.S.). Purina is seeking to reverse the 7th Circuit’s ruling that the District Court’s entry of an injunction against parallel state class litigation while final approval of class settlement is pending was improper. A ruling on this could have a serious impact on how class actions, and particularly class settlements, proceed in the future.
The class action arose in the United States District Court for the Northern District of Illinois (other similar suits were consolidated in that court) seeking certification of a nationwide class of persons who had allegedly purchased unsafe dog treats. In May 2014, the parties agreed to a settlement and moved the District Court to conditionally certify the nationwide class, approve a notification method, and preliminarily approve the settlement terms. Prior to the parties agreement to settle, Plaintiff Curts had filed a separate suit in Missouri state court seeking a statewide class action alleging damages for the same conduct against Purina and Waggin’ Train, LLC. Accordingly, Curts objected to the motion for preliminary approval of the settlement agreement in the District Court, arguing that the settlement fund was insufficient and the interests of Missouri citizens would not be adequately represented. After consideration of the parties’ motion and Curts' objection, the District Court preliminarily certified the nationwide class and approved the settlement and, at the same time, scheduled a hearing to consider final approval of the settlement and class certification. In line with its preliminary approval, the District Court issued an injunction preventing class members from prosecuting other related suits while the decision on final approval was pending.
Curts appealed the injunction to the 7th Circuit and it reversed, allowing Curts’ Missouri suit to continue. The 7th Circuit found that the injunction was improper under the Anti-Injunction Act’s (28 U.S.C. § 2283) prohibition of federal courts staying proceedings in state court. The Circuit held that the injunction was not allowed under the exception allowing for a federal injunction of state proceedings when it is “necessary in aid of its jurisdiction.” The Circuit further noted that “jurisdiction” means “adjudicatory competence”, and the Missouri state case would not affect the District Court’s jurisdiction; as well as finding that the injunction would be “prudent, beneficial, [and] helpful”, but not “necessary” under the Anti-Injunction Act as required.
Purina has asked the Supreme Court to overturn the 7th Circuit’s ruling denying the injunction and hold that a Federal District Court has authority to enter an injunction against parallel state litigation pending a decision on final approval of class settlement under the Anti-Injunction Act and/or the All Writs Act. Purina asserts three reasons why the 7th Circuit was incorrect and the District Court’s entry of the injunction should stand.
First, the 7th Circuit, in its ruling, created a circuit split on whether this type of injunction was “necessary in aid of [the district court’s] jurisdiction,” which the Supreme Court needs to resolve. The 1st, 2nd, 3rd, 5th, 8th, and 9th Circuits have all held that enjoining parallel state proceedings in this situation is appropriate because parallel litigation in a state court would threaten the jurisdiction of the federal court in administering the class settlement.
Second, this issue routinely arises in district courts, as CAFA has greatly increased the amount of class litigation occurring in federal courts. It is particularly important because these injunctions frequently arise when the class litigation has reached a settlement and the parties await a ruling on final approval of the settlement, so parties in class action have a strong interest in ensuring that their hard-earned class settlements are not disrupted by parallel state litigation.
Third, the 7th Circuit’s decision was incorrect because a stay of parallel state proceedings after preliminary approval of a nationwide class settlement is “necessary in aid of [the district court’s] jurisdiction.” The stay is appropriate between the time of preliminary approval and a decision on final approval because parallel state litigation would very likely adversely affect the class members’ important decision regarding whether to object to the settlement or opt out of the class. Furthermore, they argue, that allowing parallel state proceedings may very well disturb the delicate balance struck in reaching a class settlement between the parties.
Ultimately, whether the Supreme Court decides to grant certiorari in this case may have a great effect on the administration of class settlements in federal courts in the future. Thus, resolution of this case bears watching.