The Seventh Circuit recently weighed in on the circuit split over whether a federal court, after preliminarily approving a class action settlement but before final approval, may enjoin class members from pursuing litigation related to the underlying class claims. In Adkins v. Nestle Purina PetCare,the court ruled that such injunctions were improper. — F.3d — (7th Cir. Mar. 2, 2015).
Plaintiffs argued that their dogs became ill and were injured after being fed treats sold by Nestle Purina PetCare Co. and a co-defendant. The United States District Court for the Northern District of Illinois preliminarily approved a settlement in the action pending a fairness hearing, and enjoined all class members from prosecuting litigation about the dog treats in any other forum. This ruling enjoined a statewide class action pending in Missouri relating to the same dog treats. The Missouri case pre-dated Adkins, had been pending for two years and was shortly scheduled for trial. After the federal court rejected the Missouri representative’s challenge to the injunction, the case went up to the Seventh Circuit on appeal.
The Seventh Circuit ruled that to obtain an injunction barring state-court litigation, the moving party must satisfy the standard elements for obtaining injunctive relief, as well as the heightened standards of the Anti-Injunction Act, which provides that a federal court may only grant an injunction “where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.” Because it was undisputed that the trial or a judgment in the Missouri litigation would not “imperil the district court’s ability and authority to adjudicate the federal suit,” the court found that the injunction was not necessary to aid of the district court’s jurisdiction. This was true even if the Missouri litigation caused the settlement in the federal case to fall apart because “a need to adjudicate a suit on the merits after settlement negotiations fail does not undermine the nature or extent of a court’s jurisdiction.” The court did note, however, that injunctive relief of this nature might be permitted under the Anti-Injunction Act to protect a final judgment resolving a federal class action.
In its ruling, the Seventh Circuit rejected contrary authority from other jurisdictions, including the Third Circuit, which ruled that an injunction barring class members from proceeding with state court litigation may be justified where an earlier state court judgment could disrupt the settlement negotiations in federal court. See In re Diet Drugs, 282 F.3d 220, 236 (3d Cir. 2002). To the extent such authority “supports injunctive relief before the settlement of a federal class action has become final,” the Seventh Circuit ruled that it failed “to discuss the Supreme Court’s understanding of ‘jurisdiction’ and predates its reminder in [Smith v. Bayer, 131 S. Ct. 2368 (2011)] that doubts must be resolved in favor of allowing state courts to proceed with litigation pending there.”
The arguments raised by the court in Adkins should be considered by practitioners in all circuits, particularly in so far as Adkins questions whether contrary authority which predates Bayer can still stand. At a minimum, Adkins strongly suggests that global settlement discussions with class counsel in all related actions is prudent because reliance on a preliminary approval in a federal settlement alone to enjoin state court litigation may be misplaced. Alternatively, defendants and class counsel are also incentivized to “fast track” obtaining final approval of their settlements so that they can trigger the “final federal judgment” mechanism of the Anti-Injunction Act and by-pass the Adkins roadblock to an injunction on a related state court action.