# Opposition Brief — Adams v. Merrill Lynch, Pierce, Fenner & Smith, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1995
- **Citation:** 516 U.S. 912

## Text

Supreme Court of the United States

© FILED

No. 94-1968 JUL 26 1995:

: CLERK

In The

October Term, 1995

*
J. DON ADAMS, et al.,

Petitioners,
Vv.

MERRILL LYNCH, PIERCE, FENNER &
SMITH, INCORPORATED, et al.,

Respondents.

,

v

Petition For A Writ Of Certiorari
To The United States Court Of Appeals

For The Sixth Circuit

vv

RESPONDENTS’ BRIEF IN OPPOSITION
TO PETITION FOR WRIT OF CERTIORARI

¢

Steve W. GASKINS

(Counsel of Record)

CosGrove, Fiynn & Gaskins, P.L.L.P.
333 South Seventh Street
Minneapolis, Minnesota 55402
(612) 333-9500

Mary CuLutEN YEAGER

Farcre & BENSON

Professional Limited Liability
Partnership

2200 Norwest Center

90 South Seventh Street

Minneapolis, Minnesota 55402

(612) 336-3000

Attorneys for Respondents Shelter Seagate
Corporation, Can-American Corporation,
Can-American Realty Corporation, Garrett
G. Carlson, Arni C. Thorsteinson and
Graham C. Lount

/.—— — se ow ae

"BEST AVAILABLE COPY,

QUESTIONS PRESENTED

1. Whether the United States Court of Appeals for
the Sixth Circuit’s order remanding this case to the Dis-
trict Court for an evidentiary hearing on virtual represen-
tation renders the case not yet ripe for review.

2. Whether the petitioners had sufficient minimum
contacts with the District Court to allow its exercise of
personal jurisdiction over them.

3. Whether the District Court, having personal juris-
diction over petitioners, could, under the traditional doc-
trines of res judicata and collateral estoppel, enjoin them
from relitigating claims already decided.

4. Whether the District Court’s March 24, 1992
Order regarding communications between petitioners
and their counsel, which lapsed over three years ago
upon the failure of the provisional class settlement, is
moot.

5. Whether the District Court’s March 24, 1992
Order permitting class counsel to communicate directly
with petitioners and directing all counsel to impart “accu-
rate, objective, balanced information” regarding the pro-
visional settlement was a proper exercise of the District
Court’s powers under Fed. R. Civ. P. 23(d) to control the
conduct of class actions.

ll

TABLE OF CONTENTS

Page
CAJESERIING PIG C AMEE 55 0c cccnwbntcceedvcseenes i
SER ee Ch os die han hoes Rabaiecenecaeas ll
TABLE OF AUER aie os occ ic cewecdwawicuss peas’
SEA MEIOE CP TEE CA oes cies ede avncatadeeses 2
SUUENGARY CH RUIUE he casscensevdinanvesen 8
REASONS TH? DRDET SE WOMAS ces cdccscevacsues 9

I. BECAUSE THE COURT OF APPEALS
REMANDED THIS CASE TO THE DIS-
TRICT COURT, THE CASE IS NOT RIPE
pe re te eer ee 9

Il. PETITIONERS HAD SUFFICIENT MINIMUM
CONTACTS WITH THE DISTRICT COURT TO
ALLOW ITS EXERCISE OF PERSONAL JURIS-
CCI COVE. SOU xscukan cadenbaeeens: 10

III. UNDER TRADITIONAL PRINCIPLES OF
RES JUDICATA AND COLLATERAL
ESTOPPEL, THE DISTRICT COURT MAY
PROPERLY ENJOIN PETITIONERS’ STATE
COURT PROCEEDINGS UNDER THE
ANTI-INJUNCTION ACT UPON FINDING
PETITIONERS IN PRIVITY WITH THE PAR-
SERS GP O6 v06 0s. nce hea eea has 13

IV. BECAUSE THE DISTRICT COURT’S
MARCH 24, 1992 ORDER LAPSED WHEN
THE PROPOSED SETTLEMENT FAILED,
QUESTIONS REGARDING THE ORDER’S
CONSTITUTIONALITY ARE MOOT....... 16

V. THE DISTRICT COURT’S MARCH 24, 1992
ORDER REPRESENTS A STANDARD EXER-
CISE OF THE DISTRICT COURT’S POWERS
TO CONTROL CLASS ACTION LITIGA-
WURRS 60000004. 5k tenn enek eee 16

CONCLUSION

ili

TABLE OF AUTHORITIES

Page
FEDERAL CASES
Aerojet-General Corp. v. Askew, 511 F.2d 710 (5th
Cir.), cert. denied sub nom. Metropolitan Dade
County v. Aerojet-General Corp., 423 U.S. 1026
oo BE ee ee er eer rrr rere eee eee 14
Amalgamated Sugar Co. v. NL Industries, Inc., 667 F.
EO A 14
Becherer v. Merrill Lynch, Pierce, Fenner & Smith,
fae ©. sapp. Joo (E.D. Mich. 1992)....7.....¢...... 2
Becherer v. Merrill Lynch, Pierce, Fenner & Smith,
809 F. Supp. 1259 (E.D. Mich. 1992)........... passim
Becherer v. Merrill Lynch, Pierce, Fenner & Smith, 43
ee ES RID oon viv sds e vs castevcresweees 5
Brotherhood of Locomotive Firemen & Enginemen v.
Bangor & A.R. Co., 389 U.S. 327 (1967)....... Pere
Cactus Pipe & Suppiy Co. v. M/V Montmartre, 756
es ER. Ee ee 1]
Carlough v. Amchem Products, 10 F.3d 189 (3rd Cir.
ELE OOO ETE T Ee TET Se Tee EL EEE Eee 12
Dewey & Almy Chemical Co. v. Johnson, Drake &
Pier, inc., 25 F. Supp. 1021 (D.C.N.Y. 1939)....... 13
Finberg v. Sullivan, 658 F.2d 93 (3d Cir. 1980)........ 16
Gerrard v. Larsen, 517 F.2d 1127 (8th Cir. 1975) ...... 14

Grammenos v. Lemos, 457 F.2d 1067 (2d Cir. 1972).... 11

Grimes v. Vitalink Communications Corp., 17 F.3d
1553 (3d Cir.), cert. denied, 115 S. Ct. 480 (1994).... 11

Insurance Corp. of Ireland, Ltd. v. Compagnie des
Bauxites de Guinee, 456 U.S. 694 (1982) ............ 11

iV
TABLE OF AUTHORITIES —- Continued

NLRB v. Schnell Tool & Die Corp., 359 F.2d 39 (6th

Re. NDS xo'0's os bas re eens

In re Ocean Ranger Sinking Off Newfoundland, 617 F.

Supp. 435 (E.D. La. 1985)... ... 2... cee eeeeeees:

In re Real Estate Title & Settlement Servs. Antitrust
Litig., 869 F.2d 760 (3d Cir.), cert. denied sub nom.
Chicago Title Ins. Co. v. Tuscon Unified Sch. Dist.,

BD Gis WOE CRE is MA h hewein cen ees cada wes bs

Royal Ins. Co. v. Quinn-L Capital Corp., 960 F.2d
1286 (5th Cir. 1992) cert. denied, 114 S. Ct. 1541

oo. Pere eee rer mer a eer er eer ere

Southwest Airlines Co. v. Texas International Airlines,
Inc., 396 F. Supp. 678 (N.D. Tex. 1977), aff'd, 546

F.2d 84 (5th Cir.), cert. denied, 434 U.S. 832 (1977) ....

Super Tire Engineering Co. v. McCorkle, 469 F.2d 911
(3d Cir. 1972), rev'd on other grounds, 416 US.

Rie Roh ak aks Cad RENAE LRAR AEA Cus

Thompson v. Freeman, 648 F.2d 1144 (8th Cir. 1981)...

Trans World Airlines v. Mattox, 897 F.2d 773 (5th

Cir.), cert. denied, 498 U.S. 926 (1990)...........

White v. National Football League, 41 F.3d 402 (8th

Ci We a ee a

STATE CASES

Dykes v. Trustbank Sav., F.S.B., 567 So.2d 958 (Fla.
0, Pa. Be TR ak oc ecb eke rowan ens

“es ee

Page

14

TABLE OF AUTHORITIES - Continued

Page

STATUTES
y BY a ae. PER een rn Gee Io rr u NCEE Dire e ea 3, 10
POG. es GOW Be Sees vc vac s sbavncesedesneello 9, 17

MISCELLANEOUS

7B C. Wright, et al., Federal Practice and Procedure
Bee Bi. | ie oe er er ree Pre 17

18 C. Wright, et al., Federal Practice and Procedure
& 4657 (1961 at Sapp. 1988). oon us cccecsecncceens 15

No. 94-1968
+

In The
Supreme Court of the United States

October Term, 1995
+

J. DON ADAMS, et al.,

Petitioners,

MERRILL LYNCH, PIERCE, FENNER &
SMITH, INCORPORATED, et al.,

Respondents.

+

Petition For A Writ Of Certiorari
To The United States Court Of Appeals
For The Sixth Circuit

+

RESPONDENTS’ BRIEF IN OPPOSITION
TO PETITION FOR WRIT OF CERTIORARI

+

Respondents Shelter Seagate Corporation, Can-
American Corporation, Can-American Realty Corpora-
tion, Garrett G. Carlson, Arni C. Thorsteinson and
Graham C. Lount (collectively “Shelter Seagate”), submit
this brief in opposition to petitioners’ request that this
Court issue a writ of certiorari to review the judgment of
the United States Court of Appeals for the Sixth Circuit.

¢

STATEMENT OF THE CASE

1. Proceedings Before and Opinions of the District
Court

Petitioners are members of a plaintiff class in an
action brought pursuant to Fed. R. Civ. P. 23(b)(3) in
August of 1989, in the United States District Court for the
Eastern District of Michigan. The plaintiff class (some-
times referred to herein as “unit owners”) sought dam-
ages for alleged securities and common law fraud, other
torts, and breaches of contract in connection with the
construction and sale of the Registry Resort Hotel, a 474-
room luxury hotel in Naples, Florida.

On November 19, 1990, the District Court, prior to
class certification, granted summary judgment for all
defendants on one of three fraud claims alleged by plain-
tiffs and reserved ruling on the summary judgment
motions relating to the two remaining fraud claims.
Becherer v. Merrill Lynch, Pierce, Fenner & Smith, 799 F.
Supp. 755, 782-84 (E.D. Mich. 1992). Recognizing that
plaintiffs’ fraud claims arose out of contract claims, the
District Court certified a class and ordered an expedited,
bifurcated trial on the contract claims against only Shelter
Seagate, the developer of the hotel. All of the petitioners
participated as class members in the expedited contract
trial.

After the certified class tried its contract claims
against Shelter Seagate to the District Court, but before
the Court’s decision, the parties reached a provisional
class settlement of all claims against all defendants. The
District Court approved notice of the provisional settle-
ment which was sent to each unit owner. Petitioners, who

had opted in for the contract trial against Shelter Seagate,
opted out of the provisional settlement. The settlement
failed when an excess number of unit owners opted out.

After the settlement failed, the District Court ren-
dered its decision holding that Shelter Seagate breached
its contract with the unit owners by leasing certain furni-
ture, fixtures and equipment for the hotel. It awarded the
class, which included all petitioners, judgment against
Shelter Seagate for $6.7 million. The District Court then
granted summary judgment in favor of all defendants
dismissing all plaintiffs’ remaining claims, including their
fraud claims. Id.

After petitioners learned that they had lost before the
District Court they served Merrill Lynch with a lawsuit
they had earlier filed in Collier County, Florida, asserting
the same claims that had been dismissed by the District
Court. The District Court enjoined the relitigation in Flor-
ida, under the religitation exception to the Anti-
Injunction Act, 28 U.S.C. § 2283, holding that the injunc-
tion was necessary “to protect and effectuate its judg-
ments.” Becherer v. Merrill Lynch, Pierce, Fenner & Smith,
809 F. Supp. 1259, 1271 (E.D. Mich. 1992).

Petitioners opposed the injunction, arguing that
because all claims against all defendants were not certi-
fied as a class action, the District Court lacked personal
jurisdiction over the petitioners necessary to enjoin them
from relitigating their claims. The District Court rejected
the petitioners’ argument holding:

Florida plaintiffs also argue that this court does
not have personal jurisdiction over them
because no class was ever certified for purposes

of the Merrill Lynch fraud claims. . . . Counsel
for Florida plaintiffs confuses the concept of
personal jurisdiction with the res judicata issue.
I have personal jurisdiction over the Florida
plaintiffs because they are parties to the case
before me through their representatives. They
also are members of the class in the breach of
contract trial which I conducted, and as such are
bound by the results of that trial. For these
reasons, I conclude that there is personal juris-
diction over them. As Merrill Lynch properly
points out, the Florida plaintiffs cannot claim
that this court has personal jurisdiction over
them in order to collect the $6.7 million judg-
ment from Shelter Seagate, of which they are
recipients as members of the plaintiff contract
class, and then turn around and say that this
court does not have personal jurisdiction over
them with respect to the other issues in the case.

Becherer, 809 F. Supp. at 1270 (footnote omitted).

2. The Decision on Appeal

The Sixth Circuit affirmed the District Court’s hold-
ing that it had personal jurisdiction over the petitioners
without comment. The Court of Appeals held, however,
that the District Court used an impermissibly broad defi-
nition of virtual representation, one of the elements it
relied upon to find the petitioners in privity with the
named plaintiffs. It vacated the injunction and remanded
the case to the District Court to conduct an evidentiary
hearing on whether res judicata and collateral estoppel
would bar relitigation of the claims already decided by
the District Court. The Court of Appeals stated that the

briefs submitted on appeal “demonstrate a strong possi-
bility that this case may yet be an appropriate one for
application of res judicata and collateral estoppel [if, as
defendants contend, the petitioners,] through the Asso-
ciation of Unit Owners, authorized, financed, and con-
trolled the investigation and prosecution of the Becherer
plaintiffs’ suit, including hiring an attorney and arrang-

ing to pay him a combination retainer and contingency
fee.” Becherer v. Merrill Lynch, Pierce, Fenner & Smith, 43
F.3d 1054, 1071 (6th Cir. 1995).

3. Petitioners Injected Themselves Into the District
Court’s Forum and Consented to the District Court’s
Exercise of Personal Jurisdiction.

In addition to consenting to the District Court’s exer-
cise of personal jurisdiction by actually trying their con-
tract claims against Shelter Seagate before the District
Court, petitioners acknowledged in several ways that
they were subject to the District Court’s personal jurisdic-
tion.

a. The Interpleader

Before the District Court dismissed plaintiffs’ claims,
the Registry Hotel Corporation filed an interpleader
action in the District Court against Shelter Seagate, the
Becherer class representatives and all other unit owners
similarly situated. The hotel’s unit owners, including all
petitioners, were organized in a formal organization
called the Association of Unit Owners of the Registry
Hotel (“AUO”). The AUO moved to intervene in the

interpleader action. The District Court allowed interven-
tion and, in its opinion and order dated August 13, 1992,
described the interpleader action as ancillary to the
Becherer litigation.

b. The Florida Foreclosure Actions

While both the Becherer litigation and the inter-
pleader action were pending before the District-Court,
Trustbank, which provided mortgage loans to unit
owners to finance their investment in the Hotel, began
foreclosure actions in Florida against a number of unit
owners that refused to pay their mortgages. Those unit
owners, many of whom are petitioners here, filed counter-
claims in the Florida foreclosure proceedings nearly iden-
tical to the Becherer class action complaint. Thomas Grady,
petitioners’ counsel here, represents petitioners in those
foreclosure actions. Class counsel appears as co-counsel
with Grady in many of those actions.

The unit owners moved the Florida court for a stay of
the foreclosure actions pending the District Court’s deci-
sions and orders in Becherer arguing in its brief that a stay
was appropriate because “[a]ny judgment in the class
action lawsuit will act as an estoppel to Trustbank and the
defendant from litigating issues common to both causes of
action which are actually litigated and decided in the
prior action.” The Florida Second District Court of
Appeal stayed the Florida foreclosure actions pending the
District Court’s decision in Becherer. Dykes v. Trustbank
Sav., F.S.B., 567 So.2d 958 (Fla. Ct. App. 2d Dist. 1990).

c. The Florida Action to Compel Arbitration with
the AUO

‘In April of 1990, Shelter Seagate, in an effort to
resolve a dispute with the AUOQ about management and
agency fees to which it believed it was entitled, filed a
notice of arbitration against the AUO with the American
Arbitration Association. The AUO refused to arbitrate,
forcing Shelter Seagate to file an action in Florida state
court seeking to compel arbitration. On August 29, 1990,
the AUO filed a motion to stay Shelter Seagate’s efforts to
compel arbitration pending the District Court’s decision
in Becherer. In its brief in support of its motion to stay the
proceedings, the AUO asserted that the District Court in
Becherer had personal jurisdiction over the individual unit
owners and that the parties before the District Court in
Becherer and the parties before the Florida court were
identical. The AUO stated in its brief, “[a]lthough the
AUO is not named in the class action, these actions
involve the same parties.” In further support of its
motion for a stay, the AUO argued that a stay of the
Florida action to compel arbitration was appropriate
because the decision of the District Court in Becherer
would be res judicata in the Florida action.

In addition to the AUO’s intervention in the inter-
pleader action and its request to the Florida state court
that the motion to compel arbitration be stayed pending
the outcome of Becherer, the AUO formally participated in
Becherer by filing briefs and by negotiating for nine
months with the defendants to achieve the provisional
settlement of not only Becherer but also the interpleader
action and the Florida action to compel arbitration.

4. Proceedings Relating to the District Court’s March
24, 1992 Order

During the nine months of settlement negotiations, a
rift developed between Elwood Simon, counsel for the
class, who supported the settlement, and Thomas Grady,
counsel for petitioners, who opposed the settlement. This
dispute prompted Grady to instruct Simon not to commu-
nicate with petitioners. Grady also instructed counsel for
the AUO not to communicate with petitioners.

Simon asked the District Court to intervene and the
District Court held a hearing regarding appropriate com-
munications between the unit owners’ lawyers and the
class. The Court then issued an order requiring all three
lawyers “to impart only accurate, objective and balanced
information regarding the settlement... . ”

By the spring of 1992, the settlement was defeated
and at that point, the settlement communication Order
expired.

o-

SUMMARY OF ARGUMENT

A writ of certiorari should not issue because the case
involves no important question of federal law and is not
ripe for review. Petitioners seek this Court’s review
because they claim that the District Court departed from
the accepted and usual course of judicial proceedings,
and that the Court of Appeals sanctioned that departure.
Both the determination of the jurisdictional basis a fed-
eral court requires to enjoin a state court proceeding and

ie neil nme ie

the issuance of the March 24, 1992 Order, however,
involved standard applications of law that do not warrant
review by this Court. Moreover, the Court of Appeals
vacated the injunction about which petitioners complain
and remanded the case to the District Court for an evi-
dentiary hearing on whether application of the doctrine
of virtual representation will allow reissuance of an
injunction to bar petitioners from relitigating claims
already decided by the District Court.

The questions presented, moreover, are not appropri-
ate for the exercise of this Court’s jurisdiction because the
rulings below do not conflict with the holdings of this
Court or any other Circuit Court of Appeals and they are
consistent with the application of existing law.

The District Court has personal jurisdiction over peti-
tioners as petitioners have repeatedly injected themselves
into the District Court’s forum. Petitioners’ challenge to
the District Court’s March 24, 1992 Order is moot because
that Order lapsed almost three years ago. Moreover, the
District Court properly issued its March 24, 1992 Order in
accordance with its powers under Fed. R. Civ. P. 23(d) to
control the proceedings of class actions.

*

REASONS TO DENY THE WRIT

I. BECAUSE THE COURT OF APPEALS REMANDED
THIS CASE TO THE DISTRICT COURT, THE CASE
IS NOT RIPE FOR REVIEW.

Petitioners seek this Court’s review to overturn the
Court of Appeals’ decision vacating the District Court's

|

10

injunction and remanding the case for further factual
findings. In effect, petitioners seek to prevent the District
Court’s reconsideration of its injunction enjoining peti-
tioners from pursuing their claims in Florida state court.
As such, the issue is not ripe for review by this Court. See
Brotherhood of Locomotive Firemen & Enginemen v. Bangor &
A.R. Co., 389 U.S. 327, 328 (1967) (“[BJecause the Court of
Appeals remanded the case, it is not yet ripe for review
by this Court.”)

Il. PETITIONERS HAD SUFFICIENT MINIMUM
CONTACTS WITH THE DISTRICT COURT TO
ALLOW ITS EXERCISE OF PERSONAL JURISDIC-
TION OVER THEM.

Petitioners misstate the jurisdictional basis upon
which the District Court enjoined the Florida state court
proceedings. Petitioners claim that the District Court did
not have personal jurisdiction over them and so was
without authority to enjoin the subsequent Florida state
court action under the relitigation exception to the Anti-
Injunction Act, 28 U.S.C. § 2283. This claim is incorrect
because petitioners had already submitted themselves to
the personal jurisdiction of the District Court when they
participated as class members in a trial against Shelter
Seagate; when they participated in an interpleader action
ancillary to Becherer, and before the same District Court;
when the AUO, an organization to which each petitioner
belongs, formally and informally participated in Becherer
by filing briefs; and when they participated for nine
months in settlement negotiations. |

|

11

Petitioners, by repeatedly seeking substantive relief
from the District Court, have waived any objection to
personal jurisdiction. A party can voluntarily or involun-
tarily waive its objections to personal jurisdiction. See
White v. National Football League, 41 F.3d 402, 407 (8th Cir.
1994); Trans World Airlines v. Mattox, 897 F.2d 773, 786 (5th
Cir.), cert. denied, 498 U.S. 926 (1990); see also Insurance
Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee,
456 U.S. 694, 704-05 (1982) (stating that a party may
legally submit to the jurisdiction, “whether voluntary or
not”). Thus, “[i]f a party enters a case, makes no objection
| to jurisdiction, and asks the court to act on its behalf in
. some substantive way, it will be held to have waived
further objection.” Grammenos v. Lemos, 457 F.2d 1067,
1070 (2d Cir. 1972), quoted in Trans World Airlines, 897 F.2d
at 786, and Cactus Pipe & Supply Co. v. M/V Montmartre,
756 F.2d 1103, 1108 (5th Cir. 1985); see also In re Real Estate
Title & Settlement Servs. Antitrust Litig., 869 F.2d 760, 771
(3d Cir.) (“Of course, a party should be deemed to con-
sent to personal jurisdiction if it actually litigates . . . the
underlying merits of the class action... . ”), cert. denied
sub nom., Chicago Title Ins. Co. v. Tuscon Unified Sch. Dist.,
493 U.S. 821 (1989).

Actions that a court will construe as a waiver of
personal jurisdiction include active participation in dis-
covery, filing of motions, participation in a trial, interven-
tion into an action, and objection to a class settlement.
: White, 41 F.3d at 407-08; Grimes v. Vitalink Communications
: Corp., 17 F.3d 1553, 1558 n.5 (3d Cir.), cert. denied, 115 S.
Ct. 480 (1994); Trans World Airlines, 897 F.2d at 786-87. All
of these actions are present here.

PVR Va Nec petel 2 wR ae

12

Petitioners actively participated in the litigation
because they were part of the plaintiff class in an expe-
dited trial of breach of contract claims against Shelter
Seagate. The AUO intervened in the ancillary inter-
pleader action before the District Court on behalf of all its
members including petitioners. Some petitioners filed a
notice of appearance and objection to the provisional
class settlement. All petitioners participated in settlement
negotiations through the AUO. Petitioners have submit-
ted to the District Court, have accepted, and at times
welcomed, the District Court’s action on their behalf and
have thereby waived any objection to personal jurisdic-
tion.

Petitioners argue that in a class action, the only way a
Court may obtain personal jurisdiction of class members
is by notice and opportunity to opt out of the class on
every litigated issue. This argument must fail. Indeed, in
Carlough v. Amchem Products, 10 F.3d 189 (3rd Cir. 1993), a
case relied upon heavily by petitioners, the court held
that an injunction could not be entered against an absent
class member only when there were no other minimum
contacts with the forum and when they were denied the
opportunity to opt out of the class.

In the case at bar, petitioners had more than just
minimum contacts with the forum; they participated both
formally and informally in the Becherer litigation as well
as in ancillary cases. Moreover, at the evidentiary hearing
that has been ordered on remand, there will likely be
evidence of additional contacts petitioners have had with
the District Court.

Petitioners’ boldly stated and oft repeated assertion
that the District Court lacked personal jurisdiction is

13

absurd because each petitioner opted into the District
Court’s personal jurisdiction when they became part of
the class on the contract claims. Given that, petitioners
are forced to argue that if the Court offers the class an
opportunity to opt out of a settlement, it loses the per-
sonal jurisdiction it had gained before. This cannot be,
because once petitioners consent to the jurisdiction of the
District Court for one purpose, they consent for all pur-
poses in the litigation. For example, a plaintiff is deemed
to consent to the forum court's jurisdiction for all coun-
terclaims, including non-compulsory counterclaims.
Dewey & Almy Chemical Co. v. Johnson, Drake & Piper, Inc.,
25 F. Supp. 1021, 1022 (D.C.N.Y. 1939). Thus, in this case
petitioners’ position that the District Court did not have
personal jurisdiction should be flatly rejected.!

Ill. UNDER TRADITIONAL PRINCIPLES OF RES
JUDICATA AND COLLATERAL ESTOPPEL, THE
DISTRICT COURT MAY PROPERLY ENJOIN
PETITIONERS’ STATE COURT PROCEEDINGS
UNDER THE ANTI-INJUNCTION ACT UPON
FINDING PETITIONERS IN PRIVITY WITH THE
PARTIES BEFORE IT.

Under the relitigation exception to the Anti-Injunc-
tion Act, the District Court may “enjoin a party before it
from attempting to relitigate an issue in a state court, to

1 In their brief at p-15 petitioners state, “No one contests
that Petitioners lacked the requisite minimum contacts and that
Petitioners did not consent to personal jurisdiction.” In point of
fact, everyone, including the District Court, the Court of
Appeals and all defendants, contests that proposition.

14

‘prevent any interference’ with the federal court's judg-
ment.” In re Ocean Ranger Sinking Off Newfoundland, 617 F.
Supp. 435, 436 (E.D. La. 1985) (citation omitted). The
District Court may also enjoin non-parties who are in
privity with parties before it. Royal Ins. Co. v. Quinn-L
Capital Corp., 960 F.2d 1286, 1297 (Sth Cir. 1992), cert.
denied, 114 S. Ct. 1541 (1994); Amalgamated Sugar Co. v. NL
Industries, Inc., 667 F. Supp. 87, 94-5 (S.D.N.Y. 1987);
Southwest Airlines Co. v. Texas International Airlines, Inc.,
396 F. Supp. 678, 686 (N.D. Tex. 1977), aff'd 546 F.2d 84
(5th Cir.), cert. denied, 434 U.S. 832 (1977). A court will
find a non-party to be in privity with a named party ina
prior suit “where the party to the first suit is so closely
aligned with the nonparty’s interests as to be his ‘virtual
representative.’ ” Royal Ins. Co., 960 F.2d at 1297 (citations
omitted).

The Circuit Courts of Appeals agree that whether
privity exists is a question of fact for the trial court. See
Thompson v. Freeman, 648 F.2d 1144, 1147 (8th Cir. 1981);
Aerojet-General Corp. v. Askew, 511 F.2d 710, 719 (5th Cir.),
cert. denied sub nom., Metropolitan Dade County v. Aerojet-
General Corp., 423 U.S. 1026 (1975); see also Gerrard v.
Larsen, 517 F.2d 1127, 1135 (8th Cir. 1975) (remanding the
case for a factual determination on issues of privity); cf.
NLRB v. Schnell Tool & Die Corp., 359 F.2d 39, 44 (6th Cir.
1966) (advising the plaintiff to bring supplemental pro-
ceedings before the National Labor Relations Board to
determine issues of privity).

The District Court and the Court of Appeals did not
err, much less depart from the accepted and usual course
of judicial proceedings, in determining that the District
Court could enjoin petitioners’ state court proceedings if

15

the class plaintiffs “virtually represented” the interests of
petitioners. Furthermore, the Court of Appeals did not
depart from the standard course of proceedings in
remanding the case to allow the District Court to make
factual findings on this issue.

The decision of the Court of Appeals to remand the
case for further factual findings is particularly appropri-
ate given the likelihood that the District Court will find
the parties before it virtually represented petitioners.
Courts seeking to determine whether a named party was
the virtual representative of a non-party consider such
factors as the non-party’s participation in the first trial,
the non-party’s apparent consent to be bound, apparent
tactical maneuvering and the non-party’s relationship to
the named party. 18 C. Wright, et al., Federal Practice and
Procedure § 4457 (1981 and Supp. 1995), all of which are
present in this case.

Again, all petitioners participated in an expedited
trial in the District Court on their breach of contract
claims. Some petitioners filed an objection to the provi-
sional settlement in the District Court. The belated filing
of state court arbitration proceedings and the preliminary
blocking of state court foreclosure proceedings by argu-
ing the res judicata effect of Becherer, are examples of
petitioners’ tactical maneuvering. Finally, the AUO
admits its members, including petitioners, are identical to
the plaintiff class. Hence, the District Court would not
depart from the accepted and usual course of proceedings
on remand if it were to find that the parties before it
virtually represented petitioners’ interests.

16

IV. BECAUSE THE DISTRICT COURT’S MARCH 24,
1992 ORDER LAPSED WHEN THE PROPOSED
SETTLEMENT FAILED, QUESTIONS REGARD-
ING THE ORDER’S CONSTITUTIONALITY ARE
MOOT.

The District Court’s March 24, 1992 Order, which
directed counsel to provide class members with “accu-
rate, objective, balanced information regarding the settle-
ment,” lapsed when the settlement failed. In cases in
which an alleged violation has ceased and likely will not
recur, or where interim events have “completely and
irrevocably eradicated the effects of the alleged viola-
tion,” the issues raised regarding the alleged violation
become moot. Finberg v. Sullivan, 658 F.2d 93, 97-98 (3d
Cir. 1980); see also Super Tire Engineering Co. v. McCorkle,
469 F.2d 911, 916 n.10 (3d Cir. 1972) (“Cases dealing with
elections that have taken place, orders that have expired
before review, and injunctions that have lapsed . . . are a
third type of case in which mootness occurs.”), rev'd on
other grounds, 416 U.S. 115 (1974). Thus, as the Court of
Appeals determined, petitioners’ claims surrounding the
purported unconstitutionality of the District Court's
March 24, 1992 Order are moot. As such, this Court
should decline to hear them.

V. THE DISTRICT ZOURT’S MARCH 24, 1992
ORDER REPRESENTS A STANDARD EXERCISE
OF THE DISTRICT COURT’S POWERS TO CON-
TROL CLASS ACTION LITIGATION.

The District Court’s March 24, 1992 Order repre-
sented a proper exercise of the District Court’s powers

17

under Fed. R. Civ. P. 23(d) to control class action litiga-
tion. According to Fed. R. Civ. P. 23(d)(3), a District Court
may make orders that “impose conditions on the repre-
sentative parties or on intervenors.” Such conditions may
not “create unwarranted barriers to class suits.” 7B C.
Wright, et al., Federal Practice and Procedure § 1794 (1986).
For example, a court may not require parties to receive
prior judicial approval before communicating with coun-
sel or third parties. Id. A court may, however, place
conditions on a counsel’s communication with parties so
long as a specific record supports the order, and so long
/ as the order is narrowly drawn and specitic. Id.

—

In this case, as mentioned above, the District Court
did not prohibit communications between petitioners and
their counsel, nor did it require prior judicial approval of
any communications. Rather, the District Court required
only that the communication from any of the lawyers
representing petitioners (class counsel, petitioners’ coun-
sel, and AUO counsel) be accurate, objective, and bal-
anced. Furthermore, the District Court limited its order to
communications regarding the settlement. The District
Court’s order was thus narrowly drawn, specific, and
directed to all involved counsel.

In addition, the District Court issued its Order only
after holding a hearing to consider petitioners’ counsel's
demand that direct communications between petitioners
and class counsel be terminated. At that hearing, the
District Court determined that the settlement approval
process could be undermined because of inaccurate
advice rendered by any of the counsel. Hence, the District
Court established a specific record supporting its order.
The District Court, therefore, did not depart from the

18

accepted and usual course of proceedings when it issued
the March 24, 1992 Order.

CONCLUSION

For all the reasons stated above, this Court should
deny the petition for a writ of certiorari.

Dated this 26th day of July, 1995

Respectfully submitted,

Steve W. GASKINS

(Counsel of Record)

CosGROVE, FLYNN & Gaskins, P.L.L.P.
333 South Seventh Street
Minneapolis, Minnesota 55402
(612) 333-9500

Mary CuLL—EN YEAGER

FAEGRE & BENSON

Professional Limited Liability
Partnership

2200 Norwest Center

90 South Seventh Street

Minneapolis, Minnesota 55402

(612) 336-3000

Attorneys for Respondents Shelter Seagate
Corporation, Can-American Corporation,
Can-American Realty Corporation, Garrett
G. Carlson, Arni C. Thorsteinson and
Graham C. Lount

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_1845%3A3. Public record. Not legal advice.