On June 16, 2011, the Supreme Court decided Smith v. Bayer Corp., No. 09-1205, holding that a federal court that denied class certification in a products liability action did not have authority to enjoin a state court from considering a different plaintiff's request to certify a class under state law, which applied different standards to decide the issue of certification.

In August 2001, Bayer withdrew its prescription drug Baycol from the market. Many lawsuits challenged the drug, including two putative statewide class actions filed by separate plaintiffs, George McCollins and Keith Smith, in West Virginia. The McCollins action was removed to federal court, but the Smith action remained in state court. Both cases proceeded for six years, until the federal court denied class certification, reasoning that each plaintiff would have to show "actual injury" from use of Baycol in order to recover, that the showing of harm would vary from plaintiff to plaintiff, and that therefore individual issues of fact would predominate over common issues and the case would not be suitable for class treatment under Federal Rule of Civil Procedure 23. McCollins did not appeal. Bayer then asked the federal district court for an order enjoining the West Virginia state court from hearing Smith's motion to certify a class, arguing that Smith's proposed class was identical to the one that the federal court had just rejected. The federal court granted the injunction.

The Anti-Injunction Act, 28 U.S.C. §2283, permits a federal court to enjoin a state proceeding only in rare cases, including when necessary to "protect or effectuate" the federal court's judgments. The Eighth Circuit affirmed the district court's injunction, reasoning that Smith could be bound as an unnamed member of the class McCollins had proposed, and that the extent of the class and the legal theories asserted in the two lawsuits were "sufficiently identical" to justify protecting the federal judgment from circumvention in a later state court proceeding.

The Supreme Court reversed the Eighth Circuit. It held that for the federal court's determination of the class issue to have preclusive effect, at least two conditions must be met. First, the issue the federal court decided must be the same as the one presented in the state tribunal. Second, Smith must have been a party to the federal suit, or must fall within one of a few discrete exceptions to the general rule against binding nonparties. The Court concluded that neither condition had been met.

First, the Court unanimously concluded that the issues in the federal and state proceedings were not the same. True, the proposed members of the class (all Baycol purchasers resident in West Virginia) would be the same, and the legal claims broadly overlapped. But the applicable legal standards for class certification differed. "[A] federal court considering whether the relitigation exception [to the Anti-Injunction Act] applies should examine whether state law parallels its federal counterpart," held the Court, and "the federal court must resolve any uncertainty on that score by leaving the question of preclusion to the state courts." Here, the texts of the federal and state rules for class certification were nearly identical but were interpreted differently. The federal court had applied a strict test barring class treatment when proof of each plaintiff's injury is necessary. (The Supreme Court noted that this was consistent with Eighth Circuit precedent, and "express[ed] no opinion as to the correctness of this approach.") The West Virginia Supreme Court, on the other hand, had adopted an all-things-considered, balancing test in interpreting its own class action rule. The United States Supreme Court held that, because the two courts applied different law in deciding class certification, this meant that "they decide distinct questions. The federal court's resolution of one issue does not preclude the state court's determination of another. It then goes without saying that the federal court may not issue an injunction."

Second, the Court held that Smith was not a party to McCollins' suit and was not within any of the exceptions to the general rule that a judgment cannot bind nonparties. "Neither a proposed class action nor a rejected class action may bind nonparties," the Court held. The Court acknowledged certain "policy concerns relating to the use of the class action device," due to one plaintiff after another seeking to certify essentially the same class until one court or another certified the class. But it stated that the right approach to addressing those policy concerns did not lie in binding nonparties to a judgment, but rather could be found in principles of stare decisis and comity among courts, as well as statutory solutions such as the Class Action Fairness Act and Multi-District Litigation and the possibility of changing the Federal Rules of Civil Procedure.

Justice Kagan delivered the opinion of the Court. Justice Thomas did not join the second part of the opinion.

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