Appendix — Louisiana-Pacific Corporation Corp. v. Lester Building Systems Systems, a Division of Butler Manufacturing Company (No. 05-1346)

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APPENDIX A

STATE OF MINNESOTA DISTRICT COURT

MCLEOD COUNTY

FIRST JUDICIAL DISTRICT

[Filed Jan. 27, 2003]

File No. 43-C6-00-000335

LESTER BUILDING SYSTEMS, a division of Butler

Manufacturing Company, and LESTER’S OF MINNESOTA, INC.,

Plaintiffs,

VS.

LOU!ISIANA-PACIFIC CORPORATION,

Defendant.

FINDINGS OF FACT, CONCLUSIONS OF LAW,

AND ORDER FOR JUDGMENT

This matter came on for trial before a jury oi September

24, 2002, and was tried through October 14, 2002. On

October 15, 2002, at the conclusion of deliberations, the jury

returned a Special Verdict, a copy of which 1s attached hereto

as Exhibit A. Pursuant to Rule 125 of the General Rules of

Practice for District Courts and Rule 58.02 of the Minnesota

Rules of Civil Procedure, a Stay of Entry of Judgment was

entered for thirty (30) days by this Court on October 24,

2002. By Order dated November 18, 2002, the Stay of Entry

of Judgment was extended at defendant’s request until post-

trial motions were heard and determined. A hearing on post-

trial motions was-held on December 16, 2002. The Order on

Motions deciding the parties’ post-trial motions was filed on

January 17, 2003, a copy of which 1s attached hereto as

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Exhibit B. Exhibits A and B are hereby fully incorporated by

reference and constitute the Findings of Fact and Conclusions

of Law in this matter. Accordingly, this Court having finally

determined this action,

IT IS HEREBY ORDERED THAT:

Plaintiffs are entitled to Judgment against defendant in the

amount of $31,375,862.21. This amount includes the original

jury verdict of $29,600,000; $1,519,811 in pre-verdict inter-

est; $189,255 in post-verdict interest; and $66,796.21 in costs

and disbursements. However, the United States District Court

for the District of Oregon has issued a permanent injunction

enjoining “the Minnesota state court from entering judgment”

on “the sum of $11.2 million” of the jury verdict. That

injunction is now on appeal. Accordingly, Judgment shall

now be entered in favor of plaintiffs and against defendant

in the amount of $20,074,424.21 ($31,375,862.21 minus

$11,200,000 of the verdict and $101,438 of interest per the

injunction), but in the event the injunction is vacated,

reversed or lifted, the Judgment herein shall be deemed to be

in the full amount of $31,375,862.21 nunc pro tunc. Post-

judgment interest on the amount of the Judgment will

hereafter run and be calculated at the annual percentage rate

established by the State Court Administrator.

LET JUDGMENT BE ENTERED ACCORDINGLY

FORTHWITH.

Dated: Jan. 27, 2003 /s/ L. W. Yost

The Honorable L. W. Yost

Judge of McLeod County

District Court

The above Findings of Fact and Conclusions of Law consti-

tute the Judgment of the Court.

Dated: Jan. 27, 2003 /s/ Robert L. Schmidt

District Court Administrator

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STATE OF MINNESOTA DISTRICT COURT

COUNTY OF MCLEOD

FIRST JUDICIAL DISTRICT

[Filed Jan. 27, 2003]

Court File No. C6-00-335

LESTER BUILDING SYSTEMS, a division of Butler

Manufacturing Company, and LESTER’S OF MINNESOTA, INC.,

Plaintiffs,

VS.

LOUISIANA-PACIFIC CORPORATION,

Defendant.

SPECIAL VERDICT FORM

We the jury in the above-captioned action, return the fol-

lowing answers to the questions of fact presented to us:

1. Did Lester prove its breach of express warranty claim

against Louisiana-Pacific?

Yes & No OU

Did Lester prove its breach of implied warranty claim

against Louisiana-Pacific?

Yes No (J

3. Was it proved that Lester was at fault and that such fault,

if any, was a direct cause of its consequential damages’?

Yes () No &

(If your answer to Question 3 1s “no,” go directly to

Question 5. Do not answer Question 4.)

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4. Taking all of the fault that contributed as a direct cause to

Lester’s consequential damages for breach of warranty to

be 100%, what percentage do you attribute to:

Louisiana-Pacific %

Lester 0

an

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Did Lester prove its fraud and misrepresentation claim

against Louisiana-Pacific?

Yes No 0

Did Lester prove its breach of contract claim regarding

the Builder’s Assistance Program, also referred to as the

warranty repair program, against Louisiana-Pacific?

Yes Kj No OJ

Did Lester prove its promissory estoppel claim regarding

the Builder’s Assistance Program, also referred to as the

warranty repair program, against Louisiana-Pacific?

Yes [x] No

What amount of money will fairly and adequately

compensate Lester?

Cost of Inner-Seal: S$ 3.4 million

Cost to Repair Buildings: $13.2 million

(those not barred by the

class action)

Lost Profits: $10.2 million

Cost to Restore Goodwill: S$ 2.8 million

TOTAL: $29.6 million

Without regard to the class action, what is the total

amount of money that would fairly and adequately

compensate Lester for the Cost to Repair Buildings (both

those in and out of the class aciton)?

$13.2 million

(Sign and date the Special Verdict Form and inform the Court

Security Officer that you have finished deliberating.)

Dated: 10/15/02 @ 3:05 P.M. s/ [Illegible]

Foreperson

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APPENDIX B

COURT OF APPEALS OF MINNESOTA

No. AQ3-48

LESTER BUILDING SYSTEMS, a division of Butler

Manufacturing Company, er a/.,

Respondents,

Vv.

LOUISIANA-PACIFIC CORPORATION,

Appellant.

Feb. 17, 2004

Review Denied April 28, 2004

UNPUBLISHED OPINION

HUDSON, Judge.

Appellant challenges the judgment against it as a result of

its sale of an allegedly defective pre-fabricated siding mate-

rial known as Inner-Seal. Appellant argues that the tnal court

erred by denying its JNOV and new-trial motions regarding

respondent’s breach-of-warranty and fraud claims; and argues

the tnal court also erred by denying its JNOV motion re-

garding the costs respondent paid for the siding. Because the

fraud claim is dispositive and-supports the entire award on the

breach-of-warranty and fraud claims; and because there ts a

reasonable theory that the evidence supports the verdict that

respondent is entitled to recqver the costs it paid for Inner-

Seal, we affirm the trial court’s denial of appellant's INOV

and new-tnial motions. Respondent filed a notice of review

and argues that the trial court erred by denying its new-trial

motion for punitive damages and pre-judgment interest on the

lost-profits award. Because the trial court did not clearly

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abuse its discretion by denying respondent's new-tnal motion

for punitive damages, and because the jury exercised its

discretion to determine lost profits, we also affirm the trial

court’s denial of respondent's new-trial motion and its order

denying pre-judgment interest.

FACTS

Appellant Louisiana-Pacific Corporation (LP) manufac-

tures building materials and wood products for home and

commercial builders. LP’s principal place of business is Port-

land, Oregon. LP manufactured and sold Inner-Seal, which 1s

a product used for exterior siding on homes and buildings.

Respondents Lester Building Systems, a division of Butler

Manufacturing Company, and Lester’s of Minnesota, Inc.

(collectively Lester) operate in Lester Prairie, Minnesota, and

design and sell pre-engineered wood buildings for non-

residential use through a network of. independent builders.

Lester supplies livestock-containment buildings, particularly

buildings for hogs. Prior to 1991, Lester used plywood as the

exterior siding on its livestock buildings.

In 1989, LP and Canton Lumber Company (Canton), a

third-party distributor, approached Lester and recommended

that Lester switch trom plywood to Inner-Seal. LP presented

Lester with several brochures and written product descrip-

tions that made statements about the quality of Inner-Seal. LP

assured Lester that Inner-Seal was resistant to moisture, was

proven to be superior to plywood, and that it came with a

written 25-year limited warranty. Over the next 18 months.

LP made additional sales visits to Lester, where LP continued

to describe Inner-Seal as being superior to plywood. To

ensure that LP understood the purpose for which Lester

would use Inner-Seal. Lester showed LP its plant and the

process it used to manufacture its exterior wall units and took

LP to livestock buildings to see Lester's buildings in use. In

addition, Lester invited LP to its annual builders’sales

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meeting to describe Inner-Seal and its warranties to Lester's

independent builders. At this meeting, LP discussed Inner-

Seal’s qualities, testing, and warranties and assured the build-

ers that Inner-Seal came with a 25-year warranty. Lester

contends that LP never mentioned any limitations on the 25-

year warranty, nor did the brochures or written descriptions

set forth any exclusion of remedies or warranty disclaimers.

Lester contends that it relied heavily on the representations

LP made from 1989 to 1991 in deciding to purchase Inner-

Seal. Lester’s procurement manager asked LP about their

experience with Inner-Seal in the field, and LP responded that

it had experienced “no problems” with Inner-Seal and that the

product was performing well. In addition, Lester sent a letter,

dated February 4, 1991, asking LP to confirm that Inner-Seal

was suitable for use in Lester’s buildings. LP replied with a

letter dated February 13, 1991, stating that Inner-Seal was fit

for Lester’s particular purpose and that Lester would have

“no problems with this wall panel.”

LP maintains that the warranty that accompanied Inner-

Seal disclaimed liability for all incidental and consequential

damages, and that the product brochure specifically directed

Lester to contact LP for a copy of the “full warranty terms

and conditions.” LP also argues that Lester negotiated the

contract with Canton for the purchase of Inner-Seal and that

the negotiations covered price, lead-time, and warranty. As a

result, LP claims, the 25-year warranty and its disclaimers

“passed through” from LP to Canton to Lester and _ its

customers. Thus, LP argues, as third-party beneficiary of the

warranty, Lester 1s precluded from bringing its claims for

consequential and incidental damages.

Lester ultimately purchased more than $3.4 million worth

of Inner-Seal from 1991 through 1996 and installed it on

more than 3,000 buildings it manufactured and sold (mostly

hog barns) to individual builders and farmers. Lester provided

its own warranty with these buildings. Lester claims it did not

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receive LP’s full written warranty with the disclaimers until

years after the sales. and thus the exclusions were not an

integral part of the transactions and therefore were void.

After Lester had been buying Inner-Seal for several years,

reports appeared in publications about lawsuits against LP

regarding Inner-Seal. Lester’s president testified that LP’s

CEO assured him that the reported problems had nothing to

do with the product Lester was using and Lester had nothing

to worry about. Lester continued to buy Inner-Seal.

But during the time Lester was purchasing Inner-Seal, LP

received many complaints about the siding’s performance. LP

received more than 2,500 claims from Minnesota alone. In

addition, the Minnesota Attorney General was investigating

LP for fraudulent trade practices because Inner-Seal failed to

satisfy its product descriptions and warranties. By 1995, the

complaints led to the filing of several lawsuits, including a

nationwide class-action lawsuit in the United States District

Court for the District of Oregon. That litigation led to a

settlement between LP and a nationwide class of all persons

who owned buildings on which Inner-Seal siding had been

installed prior to January 1, 1996. The settlement was ap-

proved by the federal court in 1996, and it resolved the claims

of all building owners throughout the country in exchange for

LP’s establishment of (1) an administration system to review

and process claims, and (2) a settlement fund that has now

paid approximately $500 million to class members in the six

years since it was established. As part of the settlement, the

owners of buildings with Inner-Seal siding installed before

January 1, 1996, released claims against LP and against all

those in the chain of distribution, including manufacturers

and builders.

In late 1995 or early 1996, Lester began receiving claims

from its customers that Inner-Seal was failing on_ their

buildings. Lester notified LP, and the parties conducted joint

inspections and agreed on certain repairs. LP initially ad-

is

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dressed the claims under its written 25-year warranty and

paid for the repairs on approximately 90 buildings. But LP

later insisted that Lester’s customers submit their claims

through the class-action settlement administration. According

to Lester, the settlement administration only made problems

worse, because customers who sought compensation from the

settlement administration found the process frustrating and

the remedy insufficient. But none of Lester's customers opted

out of the class settlement, and indeed a few of Lester’s

customers made claims through the settlement administration.

By late 1996, Lester had received so many complaints that

it stopped buying Inner-Seal and switched back to plywood

siding. Lester contends that it lost many regular customers

and its reputation was ruined. Lester claims that sales dropped

from $15 million in 1998 to $4 million in 1999, that its sales

have not recovered, and that its business is at the brink of

extinction. In 2000, Lester commenced this action against LP,

contending that Lester had suffered loss of goodwill-and

profits as a result of LP’s siding and its refusal to fund direct

repairs of the barns Lester sold. Lester’s claims included

breach of contract, breach of express and implied warranties,

fraud, misrepresentation, breach of the implied duty of good

faith and fair dealing, tortious interference with contract, and

various statutory claims. Lester later added a claim seeking

punitive damages.

The trial court dismissed several of Lester’s claims on LP’s

early motion for partial judgment on the pleadings: but it

left the breach-of-warranty (express and implied) and fraud

claims for trial. The case was tried to a jury, with Lester

asserting the breach-of-warranty and fraud claims, seeking

damages for consequential losses, the purchase price it paid

for the siding, and the cost to repair and replace the siding on

all of the barns it built using Inner-Seal. LP brought directed-

verdict motions at the close of Lester’s case and at the close

of its own case. The tral court denied both motions: but it

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determined that repair and replacement costs were recov-

erable if (1) the barns had been built after January 1, 1996, or

(2) the jury found either (a) that the class-settlement fund

would be insufficient to pay an owner’s claim or (b) that the

barns would suffer defects after January 1, 2003. Otherwise,

repair and replacement costs were not recoverable. The trial

court included a question on the special-verdict form asking

the jury to specify the damages it was awarding for building

repair costs and the amount it would have awarded but for the

class action. The punitive-damages claim was not submitted

to the jury.

The jury found that LP breached express and implied

warranties, breached a contract to repair the buildings, and

defrauded Lester. The jury returned a special verdict in favor

of Lester for $29.6 million, including $13 million in lost

profits and goodwill, $13.2 million in repair and replacement

costs, and $3.4 million in costs Lester paid for the siding. The

jury did not differentiate between the amount it was awarding

and the amount covered by the class action. On October 24,

2002, the trial court filed its findings of fact, conclusions of

law, and order for judgment, but stayed the entry of judgment

pending post-trial motions.

Both parties brought post-trial motions, including LP’s

motions for judgment notwithstanding the verdict and for a

new trial. Lester also moved for a new trial on the punitive-

damages issue and a motion for pre-judgment interest on its

past lost-profits award. LP sought an injunction from the

United States District Court for the District of Oregon to

enforce the class-action settlement and to enjoin the entry of

judgment on the portion of the jury verdict that awarded

damages to Lester for the cost to repair and replace siding. On

December 13, 2002. the federal court partially granted that

motion and entered an order enjoining the Minnesota trial

court from entering judgment against LP for $11.2 million of

the jury’s $13.2 million verdict for repair and replacement

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costs. Lester appealed that ruling to the Ninth Circuit Court of

Appeals, and the State of Minnesota filed an amicus brief also

seeking to overturn the injunction. That appeal is pending.

The Minnesota trial court issued its order on all post-trial

motions, generally denying both parties’ motions. On January

27, 2003, the trial court entered a revised order for judgment

directing entry of judgment against LP in an amount reduced

to reflect the Oregon federal court injunction. The trial court

directed that in the event the federal court injunction was

vacated, the judgment would be deemed nunc pro tunc in the

full amount of the jury verdict with pre-verdict interest.

LP filed a notice of appeal on March 6, 2003. Lester filed a

notice of review on March 21, 2003. This appeal follows.

DECISION

I

LP makes several arguments in support of its position that

the trial court erred in denying its JNOV and new-trial

motions with respect to respondent’s warranty claims. LP

argues the trial court erred in ruling that the warranty ex-

clusion of consequential damages and disclaimer of war-

ranties did not apply to Lester. LP also argues that the tral

court erred in ruling that there was a separate contract

between LP and Lester and erred in permitting Lester to

recover the costs it paid for Inner-Seal. Finally, LP argues

that the limited warranty caps any damage award at twice

Lester's cost. Lester counters that the warranty exclusion of

consequential and incidental damages was not enforceable

and contends that LP did not disclaim the implied warranties

or limit its lability because the disclaimer of warranties and

limitations were not part of the initial sales transactions.

Lester also argues that the trial court correctly found that

there was a contract between LP and Lester and properly let

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the jury decide the terms of the warranty. Finally, Lester

argues that the evidence supports awarding the costs it paid

for the siding.

This court reviews de novo the denial of a motion for

JNOV. Pouliot v. Fitzsimmons, 582 N.W.2d 221, 224 (Minn.

1998). Where the trial court has denied JNOV, this court

reviews the evidence in the light most favorable to the

prevailing party and the denial “must be affirmed, if, in the

record, there is any competent evidence reasonably tending to

sustain the verdict.” /d. (quotation omitted). This court will

not set aside the verdict “if it can be sustained on any

reasonable theory of the evidence.” /d.'

A.

LP argues that the warranty exclusions of consequential

and incidental damages apply to Lester’s tort claims. Lester

counters that LP waived this issue because LP did not raise it

below. Lester further argues that if the issue is not waived,

the warranty exclusion of consequential damages does not

apply to its fraud claim. From our review of the record, it

appears that LP raised this argument in its memorandum in

support of its motion for partial summary judgment, but failed

to seck a jury instruction or assert the argument in its JNOV

or new-trial motions. But LP was prevented from pursuing

this argument at trial because the trial court ruled the exclu-

LP also raised many of its JNOV arguments in a motion for a new

trial, including arguing that the trial court erred in ruling that the warranty

exclusion of consequential damages and disclaimer of warranties did not

apply to Lester and that the tral court erred in failing to give LP's

proposed jury instruction regarding the class settlement. “On appeal from

a denial of a motion for a new trial. the verdict must stand unless it is

manifestly and palpably contrary to the evidence, viewed in the light most

tavorable to the verdict.” ZumBerge v. N. States Power Co., 481 N.W.2d

103. 110 (Minn.App.1992). review denied (Minn. Apr. 29, 1992). Thus,

under either this standard or the JNOV standard. we affirm on Lester's

fraud claim

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sions were not communicated to Lester as part of the initial

bargain, and therefore Lester was not precluded from re-

covering consequential, incidental, and breach-of-implied-

warranty damages. But we need not reach Lester’s breach-of-

warranty claims because we hold that the trial court properly

denied LP’s motion for JNOV on Lester's fraud claim, which

we deem dispositive.

Reviewing the denial of JNOV in the light most favorable

to the verdict, there 1s competent evidence reasonably tending

to sustain the jury’s verdict on Lester’s fraud claim. It is well

settled that a disclaimer of warranties does not preclude an

action for fraud. See Hydra-Mac, Inc. v. Onan Corp., 430

N.W.2d 846, 852 (Minn.App.1988) (holding a disclaimer of

warranties does not preclude an action for fraud), aff'd in

part, rev'd in part by Hyvdra-Mac, Inc. v. Onan Corp., 450

N.W.2d 913 (Minn.1990). Thus, while LP may exclude

consequential damages, the exclusion is ineffective as to LP’s

own fraud. Clements Auto Co. v. Serv. Bureau Corp., 444

F.2d 169, 188-89 (8th Cir.1971) (applying Minnesota law and

finding an exclusion of consequential damages is ineffective

as to a party's own fraud). Viewing the evidence in the light

most favorable to Lester, we conclude the evidence supports

the finding that the disclaimer of warranties and exclusion of

consequential damages is ineffective as to LP’s own fraud.

This is true even if we were to accept LP’s claim that the

warranty exclusion of consequential damages and disclaimers

“passed through” Canton to Lester, making it irrelevant

according to LP—-that Lester did not actually see the exclu-

sion and disclaimer language unt] years after the sales were

completed. In sum, LP cannot contractually disclaim liability

for consequential damages resulting from its fraudulent contract.

LP also argues that the economic-loss doctrine precludes

Lester's recovery of damages for fraud and misrepresentation

because it prevents recovery in tort when contract remedies

are available. Lester counters that the economic-loss statute

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exempts claims of fraud. Viewing the evidence in the light

most favorable to Lester, we conclude there is competent

evidence reasonably tending to sustain the verdict. The

economic-loss statute precludes recovery for economic loss

for certain torts, but the statute specifically states that claims

based on fraud are not barred. See Minn.Stat. § 604.10(e)

(2002) (stating the economic-loss doctrine shall “not be

interpreted to bar tort causes of action based upon fraud or

fraudulent or intentional misrepresentation or limit remedies

for those actions”). Therefore, the economic-loss statute does

not preclude Lester from recovering damages for fraud and

misrepresentation.

LP contends, however, that cases applying the economic-

loss doctrine have barred recovery on fraud and misrepre-

sentation claims that are: (1) not independent of or collateral

to an underlying contract for the sale of goods; and (2) relate

to the character and quality of the goods. LP contends that

Lester’s fraud and misrepresentation claims concern the

quality and character of Inner-Seal. Lester counters that the

fraud and misrepresentation claims extend beyond the quality

and character of Inner-Seal and that the statute does not

require that actionable fraud be independent of or collateral to

the contract.

LP’s position 1s not supported by the law or the facts 1n this

case. First, the federal cases that LP relies on did not consider

the recent amendment to section 604.10, which clearly states

that fraud claims are not barred. See Marvin Lumber & Cedar

Co. v. PPG Indus., Inc., 223 F.3d 873, 882 (8th Cir.2000)

(stating that the amendment to Minn.Stat. § 604.10(e) that

states “this section shall not be interpreted to bar tort claims”

does not apply to this case); AKA Distrith. Co. v. Whirlpool

Corp., 137 F.3d 1083, 1086 n. 3 (8th Cir.1998) (finding that

Minn.Stat. § 604.10 does not apply). In addition, the statute

makes no distinction between fraud that 1s and fraud that ts

not independent of or collateral to the underlying sales

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contract; nor does it state that misrepresentation claims

relating to the character and quality of the goods are barred.

See Minn.Stat. § 604.10. Furthermore, the evidence, viewed

in the light most favorable to Lester, supports the finding that

Lester’s fraud and misrepresentation claims extend beyond

the quality and character of Inner-Seal. LP represented that it

rigorously tested Inner-Seal and it was proven to be superior

to plywood; but evidence produced at trial revealed that LP

had not performed any tests showing that Inner-Seal was

superior to plywood. LP also represented that it had no prob-

lems with Inner-Seal in the field, but the evidence showed LP

had received and settled numerous claims across the nation.

In addition, the evidence showed that at the same time LP

was telling Lester that it had no problems with Inner-Seal, the

Minnesota Attorney General was investigating LP for decep-

tive marketing practices. The evidence also revealed that after

Lester heard of problems with Inner-Seal, LP falsely assured

Lester that the problems had nothing to do with the Inner-Seal

that Lester was purchasing and that Lester had no reason to

worry. Plainly, this evidence goes to the character and quality

of Inner-Seal, but it also demonstrates a pattern of misrep-

resentation by LP in order to induce Lester to purchase Inner-

Seal and to continue purchasing Inner-Seal. In the light most

favorable to Lester, the evidence supports the finding that

LP’s representations extended beyond the quality and charac-

ter of Inner-Seal. And even if it did not, the economic-loss

statute does not specifically bar misrepresentation claims

relating to the quality and character of product.

LP also argues that even if the economic-loss doctrine did

not bar Lester’s fraud and misrepresentation claims, Lester's

damages for fraud are limited to its out-of-pocket losses. LP

argues that damages for anticipated lost profits are not

available in Minnesota on a fraud claim. Lester counters that

LLP never raised the “out-of-pocket” argument below and this

court should not consider it. Lester contends that if this court

considers the out-of-pocket loss issue, Lester is entitled to the

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full jury award on its fraud claim because the jury did not

award Lester future lost profits. A review of the record

. reveals that LP did not raise the out-of-pocket loss issue

below, and this court will not consider arguments not raised

in the court below. Thiele v. Stich, 425 N.W.2d 580, 582

(Minn.1988). Even if LP had raised the out-of-pocket issue

below, the jury only awarded Lester its actual lost profits and

did not award anticipated lost profits. The testimony pre-

sented by Lester’s damages expert was that Lester suffered

$10.2 million in past lost profits, and L ester anticipated losing

an additional $2.7 million of profits during 2003. The jury

entered $10.2 million on the special-verdict form next to the

category entitled “Lost Profits.” Viewing the evidence in the

light most favorable to the verdict, the jury awarded Lester its

actual lost profits and did not award anticipated lost profits.

B.

LP argues that the trial court erred by permitting Lester to

recover the cost it paid for the siding because the evidence

shows that Lester resold the siding it purchased from LP at a

profit, and Lester therefore has no damages. Lester argues

that the difference between the actual value of the siding and

its value had it been as warranted was $3.4 million, and under

Minnesota law, it is entitled to recover the difference between

the value of the product as warranted and the value as

accepted, regardless of whether the purchaser resells it for an

equal or greater price.

It is well settled that a buyer is entitled to recover the

difference between the value of the product as warranted and

the value of the product as accepted, regardless of whether

the buyer iesells the product for an equal or greater price.

Miamisburg Twine & Cordage Co. v. Wohlhunter, 71 Minn.

484, 486, 74 N.W. 175 (1898): see also DeGidio Oil & Gas

Burner Sales & Serv., Inc. v. Ace Eng'g Co., 302 Minn. 19,

27-28, 25 N.W.2d 217, 223 (1974) (finding a buyer of a

detective product can recover the full price paid for the

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product regardless of the profit it realized on resale). Viewing

the record in the light most favorable to Lester, there is

competent evidence reasonably tending to sustain the verdict.

The evidence shows that LP warranted the value of Inner-

Seal to be $3.4 million, based on the price Lester paid for

Inner-Seal. The evidence also shows that because Inner-Seal

could not be used for Lester's intended purposes, it had no

value to Lester when Lester purchased tt. Because there is a

reasonable theory supporting the verdict that Lester is entitled

to recover the costs it paid for Inner-Seal, we affirm.

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LP argues that the trial court erred in allowing the jury to

consider Lester’s claim for repair and replacement costs on

buildings constructed before January 1, 1996, but contends

that the error has been rectified by the injunction issued by

the federal district court in Oregon. Therefore, LP contends,

this court need not address the issue unless and until the

Ninth Circuit reverses that injunction. Lester counters that the

jury properly awarded damages for the cost to repair. Lester

contends that the issuc is ripe for review now and argues that

LP has waived the issue since it asked this court not to review

the issue.

The judgment that the Minnesota trial court entered does

not include the $11.2 million portion for repair costs, because

the Minnesota trial court complied with the federal injunc-

tion. The Minnesota trial court stated that if the injunction ts

vacated, the award will be in the full amount (which includes

the $11.2 million) nunc pro tune. Because the $11.2 million

for repair costs is not currently part of the judgment, LP is

currently not aggrieved by the judgment and cannot-appeal it.

Therefore, this court need not address the issue. 7win Cities

Metro, Pub. Transit Area v. Holter, 311 Minn. 423, 425, 249

N.W.2d 458, 460 (1977) (holding a party not aggrieved by a

judgment cannot appeal it); see also Schaust v. Town Bd. of

Hollywood Township, 295 Minn. 571, 572, 204 N.W.2d 646,

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648 (1973) (appeal from judgment prior to entry 1s premature

and must be dismissed). It is possible the federal injunction

will never be reversed, and therefore>LP may never be

aggrieved. If the injunction 1s reversed, the trial court would

amend the current judgment to enter the $11.2 million portion

for repair costs, and LP may appeal from the amended

judgment at that point. See Duluth Ready-Mix Concrete, Inc.

v. City of Duluth, 520 N.W.2d 775, 777 (Minn.App.1994)

(stating that entry of judgment nunc pro tunc cannot operate

to cut off a party’s appeal rights). LP will, however, be

limited to appealing only the issues in the amended judg-

ment. See Burwell v. Burwell, 433 N.W.2d 155, 156 (Minn.

App.1988) (stating that on appeal from an amended judg-

ment, this court may not review issues decided in the original

judgment). The fact that LP will be limited to appealing the

issues in the amended judgment will not affect LP’s nghts, as

LP has raised its other issues stemming from the original

judgment in this appeal.

Lester argues that the trial court abused its discretion in

denying Lester's motion for a new tnal on the punitive-

damages tssuc.

The trial court has the discretion to grant a new trial and

this court will not disturb the decision absent a clear abuse of

that discretion. /lalla Nursery, Inc. v. Baumann-Furrie & Co.,

454 N.W.2d 905, 910 (Minn.1990). The verdict must stand

unless it is “manifestly and palpably contrary to the evidence,

viewed in the light most favorable to the verdict.” ZumBerge,

481 N.W.2d at 110.

In Minnesota, a party is entitled to a new trial on the issue

of punitive damages if it presented clear and convincing

evidence that the defendants acted with “deliberate disre-

gard for the rights or safety of others.” Minn.Stat. § 549.20,

subd. I(a) (2002): /lawhkinson v. Gever, 352 N.W.2d 784.

19a

788-89 (Minn.App.1984). A defendant acts with deliberate

disregard if

the defendant has knowledge of facts or intentionally

disregards facts that create a high probability of injury to

the rights or safety of others and: (1) deliberately

proceeds to act in conscious or intentional disregard of

the high degree of probability of injury to the rights or

safety of others; or (2) deliberately proceeds to act with

indifference to the high probability of injury to the nghts

or safety of others.

Minn.Stat. § 549.20, subd. 1(b). A defendant is willfully in-

different to the rights of others if the defendant allows a busi-

ness to “slowly and painfully die” because of an intentional

fraud that is concealed. Hydra-Mac, 430 N.W.2d at 856.

The evidence here does not rise to the high clear-and-

convincing standard to show that LP deliberately disregarded

Lester’s nghts. We acknowledge that there 1s some evidence

to support Lester’s argument. including: LP’s representation

to Lester that LP had no problems with Inner-Seal in the field,

when in fact LP had received, and settled, numerous claims;

and LP’s assurance that Lester had no reason to worry,

because the problems Lester inquire? about had nothing to do

with the Inner-Seal Lester was purchasing. The evidence also

suggests, however, that LP was engaged in efforts to ensure

Inner-Seal would be well suited to Lester’s application and

even declined to sell the product for interior applications that

LP thought would be inappropriate. The evidence also shows

that when Inner-Seal began to fail, LP initially worked with

Lester to reimburse Lester for the cost of repairs. The trial

court was correct when it stated, “The evidence presented by

[Lester] about what took place during the time period that

they purchased Inner-Seal in, although reprehensible, did not

rise to the level of clear and convincing evidence that there

was deliberate disregard on the part of [LP] in its dealings

with Lester.” Because the trial court did not clearly abuse its

20a

discretion in denying Lester’s motion for a new trial on the

punitive-damages issuc, we affirm.

Il]

Lester argues it is entitled to pre-judgment interest on the

lost-profits award, because the lost profits were readily

ascertainable at the time the losses v ere incurred.

Both statute and common law govern the award of pre-

judgment interest. Minn.Stat. § 549.09 (2002), Trapp vy.

Hancuh, 587 N.W.2d 61, 63 (Minn.App.1998). The construc-

tion of a statute is a question of law that is reviewed de novo.

Trapp, 587 N.W.2d at63. Issues underlying the application of

the statute, such as whether a claim is readily ascertainable,

are questions of fact ‘hat will not be reversed unless clearly

erroneous. /d.

Minn.Stat. § 549.0¢ permits the recovery of pre-judgment

interest on damages, with various exceptions including future

damages, irrespective of whether the damages were ascer-

tainable prior to trial. Minn.Stat. § 549.09, subd. 1(b) (2002);

see Leinhard v. State, 431 N.V.2d 861, 865 (Minn.1988)

(stating that section 5¢9.09 was amended to allow pre-verdict

interest irrespective of a defendant's ability to ascertain the

amount of damages fer which he might be held liable). Pre-

judgment interest is not appropriate when calculation of

damages rests in whele or in part on the jury’s discretion.

Noble v. C.E.D.O., Inc., 374 N.W.2d 734, 743 (Minn.

App.1985), review denied (Minn. Nov. 18, 1985): Spinett,

Inc. v. Peoples Natwal Gas Co., 385 N.W.2d 834, 841

(Minn.App.1986).

The trial court noted that the jury, in exercising its dis-

cretion, determined that lost profits had been proven. The

parties’ experts preseated conflicting testimony on Lester's

lost profits. LP’s expert testified that the hog market was very

soft and attributed that to Lester’s drop in profits. Lester's

own witnesses. including its former president, published

2la

articles about the collapse of the hog industry. The jury could

have found that the state of the hog market contributed to

Lester’s drop in profits. Because we conclude that the jury

exercised its discretion to determine the proper calculation of

Lester’s lost profits, pre-judgment interest is not appropriate,

and we affirm.

Affirmed.

22a

APPENDIX C

IN SUPREME COURT

STATE OF MINNESOTA

[Filed Apr. 28, 2004]

A03-48

LESTER BUILDING SYSTEMS, a division of Butler

Manufacturing Company, ¢¢ a/.,

Respondents,

VS.

LOUISIANA-PACIFIC CORPORATION.

Petitioner.

ORDER

Based upon all the files, records and proceedings herein,

IT IS HEREBY ORDERED that the petition of Louisiana-

Pacific Corporation for further review be, and the same is,

denied.

Dated: April 28, 2004

BY THE COURT:

/s/ Kathleen A. Blatz

KATHLEEN A. BLATZ

Chief Justice

Fs Supreme Coun JS

ry n FILED

—-

JUN 6 - 2006

OFFICE OF THE CLERK

No. 05-1346

In the

Supreme Court of the Hnited States

October Term, 2005

LOUISIANA-PACIFIC CORPORATION,

Petitioner,

Vv.

LESTER BUILDING SYSTEMS, A DIVISION OF

BUTLER MANUFACTURING COMPANY, and

LESTER'S OF MINNESOTA, INC.,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

oe ueainets SO OH

pana in sunieeeanieaiimmetaie

PETITIONER'S REPLY TO BRIEF IN OPPOSITION

MICHAEL H. SIMON

Counsel of Record

Perkins Coie LLP

1120 NW Couch St., 10" FI.

Portland, OR 97209

(S03) 727-2018

Counsel for Petitioner

WILSON-EPES PRINTING CO., INC. - (202) 789-0096 - WASHINGTON, D. C. 20001

-ii-

CONTENTS

TABLE GP AG Berra ete ini iatkieebckakiandblaricetarnces. ill

A. Contrary to Respondent's Overly Narrow

Reading of the Case Law, the Court of

Appeals’ Decision Creates a Conflict Among

tine CE CURIRE ss Sascocacevacaeseaseres OMEN eetad ae eid aaitdinca Ueishasodevecescasss 2

B. Respondent's Other Arguments in Opposition

to the Petition Are Also Without Merit

C. Conclusion

-ill-

TABLE OF AUTHORITIES

Cases

Ag-Chem Equip. v. Ceram-Traz Corp.,

C9-95-2074, 1996 WL 229263 (Minn. Ct.

A. FO 1; FPO abinntndsnianiishinnmncipsesnad 4

Battle v. Liberty National Life Ins. Co.,

O2F PA OE FT CULE GAs TONED scsvtticerateriiscagiann y Tp

Carlough v. Amchem Products, Inc.,

HGF ek: FP CNG GAR, ESBS weit citiscccttinidccats 3

DeGidio v. Ace Engineering Co.,

Ged IN. EE EF COIR, EDP ice sicesinessacsscersin sadncantnensssnvicics 4

Donovan v. City of Dallas,

EE Bees MOF POE ishtheedstcheanreakosesatendinnetighae 7

In re Baldwin-United Corp.,

FPO FBO S28 CREM, BPRS inc cvcicsssissincisicscsvarcccsdy Oy Mp Oe @

In re Diet Drugs,

PE CE LOTR OE GR: BORE icickdcinnpvesighiiasmeinuenas tele

Toucey v. New York Life Ins. Co..,

BE cs BO CER Besistisies dsc orcas ene maces 7

United States. v. International Brotherhood of

Teamsters,

OT F.26 217 COCR, 198 idioma a?

Statutes

Be a Oe See EE ccc otha ics shecnar ssc anaabaeemere 9

28 U.S.C. § 1651(a) ("All Writs Act”)...................2, 3, 6, 7, 9

28 U.S.C. § 2283 ("Anti-Injunction Act")... passim

Pub. L. No. 109-2, 118 Stat. 4 (Feb. 18, 2005)

CR ee FACIE FON FRE Ba insnicin hicks ands nictcertrnrias cn 8,9

No. 05-1346

In the

Supreme Court of the United States

October Term, 2005

LOUISIANA-PACIFIC CORPORATION,

Petitioner.

.

LESTER BUILDING SYSTEMS, A DIVISION OF

BUTLER MANUFACTURING COMPANY, and

LESTER'S OF MINNESOTA, INC.,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT -

PETITIONER'S REPLY TO BRIEF IN OPPOSITION

L.outsiana-Pacific Corporation ("LP") respectfully submits

this reply in support of its petition for a writ of certiorari to

review the judgment of the United States Court of Appeals

for the Ninth Circuit in favor of Lester Building Systems and

Lester's of Minnesota. Inc. (collectively, "Lester").

a,

A. Contrary to Respondent's Overly Narrow Reading of

the Case Law, the Court of Appeals' Decision Creates a

Conflict Among the Circuits

At issue here is whether a district court may enjoin a por-

tion of a state court proceeding that will "directly interfere

with and seriously impair" the district court's continuing

jurisdiction over the implementation and enforcement of a

complex class action settlement,’ where the enjoined portion

of the state proceeding awards damages for the very same

injuries that were previously addressed in the class settle-

ment, thereby creating a special benefit and double recovery

for a sub-group of the class members. Under existing

precedent from the Second, Third, and Eleventh Circuits, the

answer to that question should be in the affirmative.

In the decision below, however, the Ninth Circuit answers

that question in the negative. In its interpretation of the

Anti-Injunction Act, 28 U.S.C. § 2283, and identical relevant

language in the All Writs Act, 28 U.S.C. § 1651(a), the

decision below conflicts with the decisions of other circuit

courts, including /n re Baldwin-United Corp., 770 F.2d 328

(2d Cir. 1985); Battle v. Liberty National Life Ins. Co., 877

F.2d 877 (11th Cir. 1989); United States v. International

Brotherhood of Teamsters, 907 F.2d 277 (2d Cir. 1990)

("IBT"); and In re Diet Drugs, 282 F.3d 220 (3rd Cir. 2002).

Further review therefore is warranted to resolve this conflict

and to maintain the ability of federal courts efficiently and

consistently to approve, monitor. and enforce complex

settlement agreements in class action lawsuits.

Perhaps evidencing the complexity of the underlying products l1-

ability class settlement. Respondent misstates its terms. Respondent

asserts that the setthement "does not apply to or bar . . . claims of

nonperformance that occur after January 1, 2003. Br. in Opp. & n. 2.

The state trial court in Minnesota made the same error. See Pet. App.

lla. The actual class settlement contains no such exception. See Pet.

App. San. 2. and Pet. App. 72a-73a.

iM

1. Respondent argues that the Court of Appeals’ decision

does not conflict with the Second Circuit's decision in

Baldwin-United because the Anti-Injunction Act did not

apply in that case and because "unlike the state attorneys

general enjoined in Baldwin-United, Lester asserted its own

claim for damages under Minnesota law, not a claim belong-

ing to others." See Br. in Opp. 17-18.

In Baldwin-United, however, the Second Circuit explic-

itly relics on Anti-Injunction Act cases in analyzing identical

language in the All Writs Act, and it recognizes, as have

other courts, that these statutes need to be interpreted consis-

tently. 770 F.2d at 335-36; see also Carlough v. Amchem

Products, Inc., 10 F.3d 189, 197 (3rd Cir. 1993) (holding

that the provisions of the two acts are applied similarly).

Further, in Baldwin-United the Second Circuit also rec-

ognized that while the class members themselves did not

threaten to bring additional suits, if parties "could deriva-

tively assert the same claims on behalf of [class members]

there could be no certaint{[y] about the finality of any federal

settlement." 770 F.2d at 337.

The derivative claims that the Second Circuit saw as

threatening the district court's jurisdiction are the same kind

of claims that the district court enjoined in this case. As the

dissent below correctly observed:

Lester clearly sought a double recovery for its cus-

tomers. .-.. At trial in the Minnesota state court,

Lester's president testified. He told the jury that the

company sought damages to "fix these buildings"

and to get each customer "what he's entitled to." .. .

There can be no dispute that the $11.2 million en-

joined by the district court is an award for the bene-

fit of the class member-customers, and not for the

benefit of Lester.

Pet. App. 5Sa-56a (emphasis 1n original).

The claims enjoined in Baldwin-United were not direct

claims of the class members; the injunction in that case

ie

extended to claims secking money damages of any kind as

long as they were "arising out of" the facts presented in the

district court litigation. See 770 F.2d at 334. That is the

same situation here; Lester secks money damages “arising

out of" the same facts presented in the district court litiga-

tion, namely property damage on structures owned by

Lester's customers. As the dissent below noted,

whether or not Lester had a "cognizable state law

claim" is inconsequential to the question we must

decide — whether the jury's award is inconsistent

with the settlement agreement. There can be no

doubt that it is. They jury awarded damages for the

very same repair costs previously provided for in

the settlement agreement and district court order.

Pet. App. 52a.”

The dissent in this case explicitly notes that the panel de-

cision "create[s] a direct conflict with" Baldwin-United. Pet.

* Lester also argues that under Minnesota law it is enutled to recover

the cost to repair defective product and cites in support DeGidio v. Ace

Engineering Co., 225 N.W.2d 217, 233 (Minn. 1974), and Ag-Chem

Equip. v. Ceram-Traz Corp., C9-95-2074, 1996 WL 229263, at *2-3

(Minn. Ct. App. May 7, 1996). Br. in Opp. 24. Neither case, however,

supports Lester's proposition here because both cases explicit/y assume

as part of their analysis that the end user of the products at issue would

be able to sue the plaintiffs in those cases for recovery of the costs of

product repair or replacement. In DiGidio, the court concluded that

plaintiff DeGidio “had a liability to his vendees to make them whole."

225 N.W. 2d at 222. Similarly, in 4g-Chem, the costs of repairing

machines already sold to customers was "solely Ag-Chem’s liability.”

and the repair costs awarded to Ag-Chem “accurately reflect{ed the] risk"

associated with potential future lawsuits by its customers against Ag-

Chem. 1996 WL 229263, at *3. Under the class settlement at issue here.

however. all class members fully released all claims against all persons

and entities in the chain of distribution, including Lester. Pet. App. 6a.

Because Lester faced no risk of legal liability to its customers (unlike

DiGidio and Ag-Chem), there can be no real dispute that the enjoined

portion of Lester's verdict was for the benefit of the ci ss members, not

to compensate Lester for any risk of potential lability.

-5-

App. 58a. This Court should resolve that conflict. As the

dissent commented:

The jury's verdict can be enjoined simply becausc it

awards additional damages to be used for the bene-

fit of class members in satisfaction of claims for

which they have already been compensated under

the settlement agreement. The fact that a third

party brings the action in its own name is without

consequence.

Pet. App. 58a. .

2. Respondent next argues that the Court of Appeals’

decision does not conflict with the Eleventh Circuit's deci-

sion in Battle because the court of appeals here did not hold

that the entry of a final judgment in the class action, alone,

precluded application of the "necessary in aid of jurisdiction"

exception of the Anti-Injunction Act and, unlike here, the

state court plaintiffs enjoined in Battle were members of the

class. See Br. in Opp. 18-19.

In Battle, however, the Eleventh Circuit explicitly held

that the entry of a final judgment by a district court does not

bar that court from enjoining state court action under the "in

aid of jurisdiction” exception in the Anti-Injunction Act.

Battle, 877 F.2d at 881 (citing in support cases from the

Second and District of Columbia Circuits). The decision

below reaches a contrary conclusion when it states: "Be-

cause the litigation was over, the state court action could not

have interfered with the district court's consideration or

disposition of the class claims." Pet. App. 22a.*

“In addition. the implementation of the class setthement over which

the district court retained jurisdiction had not yet been concluded when

Lester obtained its verdict in Minnesota state court. Lester's trial court

verdict was rendered in October 2002. Pet. App. 8a. In the class

settlement. however, LP retained the right to make certain decisions into

2003 regarding whether to provide additional funding to pay pending

claims. Pet. App. 4a n.1. The district court entered its permanent

-6-

Moreover, although Lester was not itself a member of the

underlying class, as the dissen: explained, allowing Lester to

recover these repair costs for the benefit of the class mem-

bers would "condone[] a double-recovery by a sub-group of

class members in. direct contravention of the settlement

agreement and encourage[] the proliferation of similar sub-

groups and similar lawsuits in other states." Pet. App. 44a.

3. Respondent next argues that the Court of Appcals'

decision does not conflict with the Second Circuit's decision

in /BT because that case did not involve the Anti-Injunction

Act and because Lester was not a member of the underlying

class. See Br. in Opp. 19-20.

The decision below refused to apply the "protect or effec-

tuate" exception of the Anti-Injunction Act to anything other

than cases in which a "rigorous application of res judicata

principles" would lead to a conclusion that the state suit was

barred. Pet. App. 28a. The court held that because Lester

was not a party to the settlement, it could not be bound by it,

and thus the damages at issue could not be enjoined.

In the Second Circuit's decision in /JBT, however, the

court held under the All Writs Act that injunctions may issue

against non-parties in order to prevent those non-parties from

interfering with a district court's ability to implement a

consent decree. 907 F.2d at 280. That authority, /B7

concluded, was necessary if the district court was to "pro-

tect" and to "cffectuate” its judgment. /d. at 280, 281. The

Second Circuit therefore found authority to issue injunctions

under the All Writs Act, and it did so using the precise

language of the third exception to the Anti-Injunction Act.

IBT explicitly holds that the binding effect of a prior judg-

ment is irrelevant to a district court's authority to "protect"

injunction against Lester on December 13, 2002. Pet. App. 70a. LP

made “s ‘nal decision to fund all outstanding claims in the class

settleme’ a September 2003. Pet App. 6a. Thus. in this very practical

sense, the district court litigation was not “over” when the district court

entered its order against Lester.

R, X

and “effectuate” its judgment as long as a subsequent action

threatens the implementation of that judgment. /d. at 280,

281. There is no reason for that to be any less true under the

Anti-Injunction Act than under the All Writs Act.

4. Respondent next argues that the court of appeals’ deci-

sion does not conflict with the Third Circuit's decision in

Diet Drugs because, among other reasons, no settlement had

been entered at the time that the district court in that case

issued its injunction, and the settlement discussions there

were in "sensitive final stages." See Br. in Opp. 20-22.

Respondent's argument misses the point of Diet Drugs.*

As the dissent below noted, Pet. App. 66a-68a, Diet

Drugs held that in complex class litigation, a settlement and

the benefits thereof become much like a res over which the

district court may exercise continuing control under this

exception to the Act. See 282 F.3d at 235-36 and n. 12.

Moreover, as this Court has long recognized, federal courts

may protect their jurisdiction over a res under the Anti-

Injunction Act. See Toucey v. New York Life Ins. Co., 314

U.S. 118, 135-36 (1941); Donovan vy. City of Dallas, 377

U.S. 408, 412 (1964).

[he idea of a complex settlement as a res within the

Court's jurisdiction — and therefore protectible even after the

entry of a "final" settlement — is one that the Ninth Circuit

brushed aside in the decision below, Pet. App. 22a n. 20, but

one on which at least the Second, Third, and Eleventh

Circuits have relied in affirming the issuance of injunctions

in order to protect complex class settlements.* It is a suffi-

cient alternative basis for the district court's authority here. -

4 aa re % :

In addition, the final implementation of the federal class settlement

here was similarly in its "sensitive final stages" at the time of the

Minnesota state trial verdict in favor of Lester. See 5 n. 3. supra.

‘In Diet Drugs, the Third Circuit notes that "several... courts have

analogized complex litigation cases to actions in rem," 282 F.3d at 235-

36 and 235 n.12 (citing cases). In Battle. the Eleventh Circuit observes

that "it makes sense to consider this case. involving years of htigation

-8-

B. Respondent's Other Arguments in Opposition to the

Petition Are Also Without Merit

Respondent also argues that this case turns on an issue of

Minnesota law, that the Class Action Fairness Act has no

bearing on this case, and that the petition should be denied

because the injunction was improper for additional reasons

not reached by the court of appeals. See Br. in Opp. 23-28.

Respondent overstates its case, ignores circuit conflicts, and

fails to recognize the national importance of the issue here.

1. In the Minnesota lawsuit, Lester was awarded a total

verdict of $29.6 million. Pet. App. lla n.8. That amount

consists of $10.2 million in lost profits, $2.8 million in cost

to restore goodwill, $3.4 million in cost of product pur-

chased, and $13.2 million in cost to repair buildings. /d.

The $13.2 million figure consists of $2 million to repair

buildings constructed after the closing for class membership

under the class definition, plus $11.2 million to repair

buildings covered under the settlement. Pet. App. 13a n. 9.

It is only this last $11.2 million that was enjoined by the

district court below. Pet. App 12a-13a. Thus, $18.4 million

of Lester's Minnesota verdict is unaffected by the district

court's injunction and is not at issue in this petition. All that

is at issue here is that limited portion of the state court

judgment ($11.2 million) that is "for the very same repair

costs previously provided for in the settlement agreement

and ‘strict court order," that is "for the benefit of the class

member-customers” (as confirmed by the trial testimony of

Lester's own president), and that constitutes a "double-

recovery by a sub-group of class members." Pet. App. 52a.

55a-56a, and 44a (Reinhardt, J., dissenting).

and mountains of paperwork, as similar to a res to be administered . . .

This lengthy. comphecated litigation is the ‘virtual equivalent of a res.”

877 F.2d a. 8&2 (citations omitted). The Second Circuit reaches the same

conclusion in Baldwin-United. 770 F.2d at 337 (same).

9.

The issue in this case is not whether Minnesota state law

would permit this verdict; the issue is whether, under federal

law, a district court may enter an injunction against a portion

of a state court verdict that the district court has found will

"directly interfere with and seriously impair" its continuing

jurisdiction over the implementation of a class settlement by

awaiding to a third party damages for the very injuries that

were addressed in the settlement. This question involves the

interpretation of the Anti-Injunction Act and the All Writs

Act, which contains relevant identical language that must be

construed consistently with the first statute.

2. As discussed in the petition, the recently-enacted Class

Action Fairness Act, Pub. L. No. 109-2, 118 Stat. 4 (Feb. 18,

2005) (amending 28 U.S.C. § 1332(d) to extend federal

jurisdiction to certain class actions alleging more than $5

million in damages), will likely result in federal courts

seeing even more filings of complex class action lawsuits,

which previously would have been filed in state court. The

uncertainty and harm created by the decision below will only

be magnified by this development. In combination with the

conflict with other circuits generated by the decision below,

the importance of this issue merits this Court's attention.

3. Before the court of appeals, Lester presented several

alternative arguments in support of its position that the

district court erred. The court of appeals rejected Lester's

subject matter jurisdiction, personal jurisdiction, and im-

proper service argument, Pet. App. 15a-17a, and Lester has

not cross-petitioned. With regard to Lester's other arguments

below, the court of appeals did not address them because it

held that the district court's injunction cannot be sustained

under the Anti-Injunction Act. Pet. App. 18a n. 15. Lester's

arguments that were not addressed by the court of appeals

have no merit and should not be considered.