# Petition for Writ of Certiorari — Epstein v. Matsushita Electric Industrial Co.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1999
- **Citation:** 528 U.S. 1004

## Text

Supreme Court, U.S.
FILED

‘te
QS 417 sep 0319

No. GFrce CE IME CLRRK
erermananeinn ie

IN THE

Supreme Court of the United States

LAWRENCE EPSTEIN, et ai.,
Petitioners,
v.

MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
and MATSUSHITA HOLDING CORPORATION,

Respondents.

On PETITION FOR A Writ OF CERTIORARI TO THE
UNITED STATES CouRT OF APPEALS FOR THE NINTH CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

RoGeR W. KirBy HENRY PAUL MONAGHAN
Counsel of Record HAROLD EDGAR

PETER S. LINDEN 435 West 116th Street

KirBy McINERNEY & Squire, LLP New York, New York 10027
830 Third Avenue (212) 854-2644

New York, New York 10022
(212) 371-6600

Attorneys for Petitioners

154358 @ Counse! Press LLC
FORMERLY LUTZ APPELLATE SERVICES
(800) 274-3321 + (800) 359-6859

Cs

i

QUESTIONS PRESENTED

Because the issue was “outside the scope of the question
presented” and was “not the basis for the decision below,” this
Court, in Matsushita Electric Industrial Co., Ltd. v. Epstein,
516 U.S. 367, 379 n.5 (1996), declined to consider petitioners’
objection that full faith and credit could not be given to a
Delaware class action judgment because the absent class
members had been inadequately represented in Delaware. 516
U.S. at 379 n.5. Three concurring justices twice stated that this
issue remained open on remand. 516 U.S. at 389, 399 (Ginsburg,
J.). On remand, all four circuit judges who examined the record
found inadequate representation, employing terms such as
“hostile” and “subvers[ive]” representation, and “collusion”
(App. 80a, 70a, 87a).

(1) Did a reconstituted panel majority err in concluding --
contrary to the decisions of this Court and every court of appeals
that has considered the issue, the Restatement (Second) of
Judgments, and the expressed views of three Justices in this
very litigation -- that so long as a state has the functional
equivalent of Rule 23, absent class members are bound by a
class action judgment no matter how apparent from the record
before the court that there was inadequate representation in fact?

(2) Does aclass action settlement judgment accord absent
class members due process when (a) there has been no inquiry
into or record evidence concerning the named plaintiffs and
their capacity to represent absent class members; and (b) the
burden to prove inadequate representation was placed upon
objectors, even though “suspicions [of collusion] abound” (App.
74a n. 17, 106a)?

(3) Despite this Court’s explicit refusal to consider the issue
and the separate statement by three Justices that the issue was
open on remand, did this Court nonetheless oblige the court
below to enforce a class action judgment that all members of
that court believed was based on inadequate representation?

ii
PARTIES TO THE PROCEEDING

The named plaintiffs in the federal class action, Epstein,
et al. v. MCA Inc., et al., No. 92-55675 (C.D. Cal.), are
Lawrence Epstein, John Linder, and Jane Rockford (as trustee
of the Michael J. Rockford Trust). Jane Rockford opted out
of the Delaware class action and is not affected by the
Delaware judgment, or the success or failure of this petition.

The defendants are MCA Inc., Matsushita Acquisition
Corporation, Matsushita Electric Industrial Co., Ltd.,
Matsushita Holding Corporation, Lew Wasserman, and
Sidney J. Sheinberg. All claims against MCA Inc., Lew
Wasserman, and Sidney J. Sheinberg have been dismissed

and those defendants are no longer parties to the action.

Matsushita Acquisition Corporation no longer exists by
virtue of having been merged into MCA Inc.

RULE 29.6 STATEMENT

All petitioners are individuals.

|

il

TABLE OF CONTENTS

RULE 29.6 STATEMENT .................... il
TABLE OF AUTHORITIES .................. iv
og ae l
ia hed asthe ds edness eckeces dc 2
CONSTITUTIONAL AND STATUTORY
Basle sg el aie dae 2
STATEMENT OF THE CASE ................. 2
REASONS FOR GRANTING THE WRIT ....... 8

POINT I. A CLASS JUDGMENT BASED
UPON INADEQUATE REPRESENTATION
IN FACT IS NOT ENTITLED TO FULL

oF , re 11
POINT II. THE DELAWARE CLASS
JUDGMENT PROCEEDING WAS
FUNDAMENTALLY FLAWED ......... 15

POINT III. THIS COURT HAS NOT
DIRECTED THE COURT BELOW TO
ENFORCE A CLASS ACTION JUDGMENT

SECURED BY INADEQUATE
REPRESENTATION. .................. 19
ET chi eerie oncvecki¥ess 2éceeil 23

APPENDIX (Submitted in a Separate Volume)

iv
TABLE OF AUTHORITIES
Page
CASES

In re “Agent Orange” Product Liability Litigation,
ew Bi vaty. fe a) rere 13

Amchem Products, Inc. v. Windsor,
Fae Cee CRED hci beans cceanc ivaceeeas passim

In re American Medical Systems, Inc.,
Fa ae BR ee Ua BE hn x ca dcdsnveneis 17

American Pipe and Construction Co. v. Utah,
ge errr rrr 17

Andrews v. Orr,
851 F.2d 146 (6th Cir. 1988) ................ 18

Bennett v. Spear,
ee Ch TE nko snnnteak oo ches cones 20

Cass County, Minnesota v. Leech Lake
Band of Chippewa Indians,
See Whi A on 04 hee x ooh beeen 20

Chicago Life Insurance Co. v. Cherry,
DOOR: Be CRP Eh cepedbndntiseedidees 16

Crown. Cork & Seal Co., Inc. v. Parker,
GES ULE. BER Ce oxnn 465064255000 17

v
Epstein v. MCA, Inc.,
30 F.3d 644 (9th Cir. 1993) ................ 3
Epstein v. MCA, Inc.,
126 F.3d 1235 (9th Cir. 1999) .............. passim
Epstein v. MCA, Inc.,
ATP Be O41. COO Coe, 198P i i okk ck passim

General Motors Corp. v. Tracy,
DEW Gide BORERMED 31 i ois Re 23

General Telephone Co. of Southwest v. Falcon,
BOF UD OT COPE ‘ndvn cde vs ldee ae eee 16

Gonzales v. Cassidy,
Gre BOG G7 UGC, LOT oi ess Be kd 13

Great Rivers Co-op of SE lowa
v. Farmland Industrial, Inc.,
120 F.3d 893 (8th Cir. 1997) ................ 17

Grimes v. Vitalink,
17 F.3d 1553 (3d Cir.), cert. den.,
BES Ws PCN oon kc Se sed. 14

Hansberry v. Lee,
Oe Wt CRMI OD. 6.008342 ic. s eis 9, 12, 13, 14

Holly Farms Corp. v. NLRB,
gk et Perperreeere rT eee 20

vi

Jefferson v. City of Tarrant, Ala.,
13S:3. Ce. GBS CER co cecteh tal Seabees 23

Kremer v. Chemical Construction Corp.,
456 US. 461 CR0GRD oe S Gee est edbins 10, 15, 21, 22

Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson,
508 UB, SIO CISSED 00 cadence wvecives Seaval 17

Martin v. Wilks,
ook s ®. fF). Se i ye ee 9

Matsushita Electric Industrial Co., Ltd. v. Epstein,
536 UB. DEF Cree hh edis ca ca dewssebecus passim

In re MCA, Inc. Shareholders Litigation,
598 A.2d 687 (Del. Ch. Apr. 22, 1991) ........ 2

NCAA v. Smith,
E5D DS. CR. SRO CROSS). hvves cbawewnds duscaes 20

Nottingham Partners v. Trans-Lux Corp.,
FSS Fw SO CRG, USGA) ccccccamesadicws 14

Ortiz v. Fibreboard Corp.,
RODD. GE Fie GRO ake bccccccvevacdues passim

Phillips Petroleum Co. v. Shutts,
eg § Mf) Es ea eee passim

Pounders v. Watson,
ripe Rl | a eee eee rr 23

vil

Prezant v. De Angelis,
636 A.2d 915 (Del. Supr. 1994) .............. 11

Protective Committee for Independent Stockholders
of TMT Trailer Ferry, Inc. v. Anderson,
Pe Rs SOO CHUED once ccnnccccedewsenct 17

In re Real Estate Title and Settlement Services
Antitrust Litigation,
869 F.2d 760 (3rd Cir.),
cert. den., 493 U.S. 891 (1989) .............. 13

Richards v. Jefferson County, Alabama,
Dae Cs VO CROEE a FALE ERG eb Ube peeves 9, 12, 21

Rodriguez de Quijas v. Shearson/American Express, Inc.,
GOO Ce SEP CE bree Fo cd ven eee nlee ces: 11, 20

State Tax Commission of Utah v. Van Cott,
306 U.S. 511, on remand,
98 Utah 264, 96 P.2d 40 (1939) .............. 22

Suitum v. Tahoe Regional Planning Agency,
re eee 23

STATUTES, RULES AND REGULATIONS

BS CW BI ci etineh bi entre ales owhaedcn 2
ane eee 2
Tg "ree. 2,3

U.S. Const. Amendment XIV .................. 2

vill
MISCELLANEOUS

F. James, G. Hazard, and J. Leubsdorf, Civil Procedure
eT ee ee 13

Hart & Wechsler’s,
The Federal Courts in the Federal System
Soe SE Va dws euewadsena endl sanueeees 22

Marcus and Sherman, Complex Litigation
SG CPE dc dad a cddd nan behaSediwes + awky 14

Monaghan, Antisuit Injunctions And Preclusion
Against Absent Non Precedent Class Members,
98 Colum. L. Rev. 1148 (1998) .............. 21

3 Newberg and Conte, Newberg on Class Actions,
SR EEE cS vcdagiecédncks ap wees 13

In The

Supreme Court of the United States

LAWRENCE EpsTEIN, et al.,
Petitioners,
V.

MatsusuitTa ELectric INpustriAL Co., Ltp. and
MatsusuitTa HoLpinG CorporAtION,

Respondents,

On Petition For A Writ or CERTIORARI
To Tue UnitTep States Court or
APPEALS For Tue Nintu Circuit

Lawrence Epstein, et al., respectfully petition for a writ
of certiorari to review the judgment of the United States Court
of Appeals for the Ninth Circuit in this case.

OPINIONS BELOW

The opinion of the court of appeals is printed in Appendix
A at la to 31a, and is reported at 179 F.3d 641. The court’s
earlier opinion is printed in Appendix B at 32a to 95a, and
reported at 126 F.3d 1235.

2

JURISDICTION

The court of appeals entered its judgment on June 7,
1999. This Court has jurisdiction under 28 U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY PROVISIONS

U.S. Const. Amendment XIV provides in relevant part:
“... nor shall any State deprive any person of life, liberty,
or property, without due process of law.”

28 USC § 1738 provides in relevant part: “Such Acts,
records and judicial proceedings . . . shall have the same full
faith and credit in every court within the United States . . . as
they have... in the courts of such State . . . from which they
are taken.”

STATEMENT OF THE CASE

1. This securities law class action arose out of
respondents’ takeover of MCA. Alleging violations of the
Exchange Act, which are within the exclusive jurisdiction
of the federal courts, 15 U.S.C. § 78aa, petitioners instituted
a proceeding in a California federal district court. Once the
federal complaint was filed, the district court was informed
that a Delaware class action asserting only state law claims
had been settled and that it purported to compromise
petitioners’ federal claims. 516 U.S. at 389-90 (Ginsburg,
J.). Rejecting the proposed settlement as “illusionary,” the
vice chancellor characterized the state law claims as “at best,
extremely weak,” and as having “little or no value.” In re
MCA, Inc. Shareholders Litig., 598 A.2d 687 at 694, 696
(Del. Ch. Apr. 22, 1991). He added that “the only claims
which have any substantial merit are the claims... in the
California federal suit that were not asserted in this Delaware
action.” Jd. at 696 (emphasis supplied).

3

The federal district court denied petitioners’ motions for
class certification and partial summary judgment and
ultimately dismissed the federal claims. After petitioners
had filed their opening brief in the Ninth Circuit, another
settlement in the then completely “dormant” (516 U.S. at
392, Ginsburg, J.) Delaware proceeding was announced.
Though stating that the benefits to the class were “meager”
and that “suspicions [of collusion] abound,” the vice
chancellor approved the settlement as an exercise of his “own
business judgment in deciding whether the settlement is
reasonable . . .” (citation omitted) (App. 102a-103a, 106a).
There was no evidence and the vice chancellor held no
hearing to determine whether, at the time they sought
certification as class representatives, the plaintiffs were even
members of the class, held any non-time-barred federal
claims, or that they otherwise adequately represented absent
class members. Similarly, there was no evidence submitted
to assure conflict-free representation by class counsel. Quite
to the contrary: “suspicions [of collusion] abound” (App.
74a n. 17, 106a). But the vice chancellor said that the three
individual objectors had not proved collusion (App. 106a).
The individual objectors were neither authorized by absent
class members, nor certified by the court, to represent the
absent class members.

In the Ninth Circuit , defendants offered the Delaware
judgment for its preclusive effect. 28 U.S.C. § 1738.
Petitioners raised three bars to preclusion: the exclusively
federal nature of the claims extinguished in the state court;
the lack of adequate representation in Delaware violated due
process; and “our federalism” prohibited such use of
moribund state litigation to preempt the class’s pending
federal appeal. In Epstein v. MCA, Inc. (“Epstein I’), 50
F.3d 644 (1993), the Ninth Circuit reversed the district court’s
dismissal on the merits, granted plaintiffs partial summary
judgment on liability, and ordered class certification. The
court addressed only the first of plaintiffs’ arguments against

4

preclusion. It refused to give the Delaware judgment full
faith and credit because that judgment compromised claims
within exclusive federal jurisdiction. So far as relevant here,
defendants petitioned for and this Court granted certiorari
limited tc the exclusive jurisdiction issue.

2. In Matsushita Industrial Electric Co., Ltd. v. Epstein,
516 U.S. 367 (1996), this Court framed the issue before it as
follows:

This case presents the question whether a federal
court may withhold full faith and credit from a
state-court judgment approving a class-action
settlement simply because the settlement releases
claims within the exclusive jurisdiction of the
federal courts.

516 U.S. at 369. The Court unanimously answered that
question in the negative.

Because the case was limited to that thresliold question,
the Court expressly declined to consider petitioners’ due
process objection to the preclusive effect of the Delaware
judgment based upon inadequate representation:

We need not address the due process claim,
however, because it is outside the scope of the
question presented in this Court. ... While it is
true that a respondent may defend a judgment on
alternative grounds, we generally do not address
arguments that were not the basis for the decision
below. (Citations omitted.)

Id. at 379 n.5. Once again, the Court was unanimous.' While

' Justices Stevens and Ginsburg dissented in part, on the issue
whether the Supreme Court in the first instance should have
construed the content of Delaware preclusion law.

i al

5

three concurring justices (Ginsburg and Stevens, J.J., joined
on this issue by Souter, J.) discussed the issue of adequacy
of representation at length, id. at 389-99, they too left
that issue for further consideration on remand. /d. at 399
(“. .. this is a court of final review and not first view. . .”).

3. Epstein II]. On remand, a divided panel concluded
that the Delaware judgment could not be given preclusive
effect because both Delaware law and federal constitutional
law prohibit enforcement of a judgment rendered in a class
action proceeding in which the interests of absent class
members were not adequately represented.

In an opinion for himself and Judge Wiggins, Judge
Norris concluded that the issue of adequacy of representation
by Delaware class counsel had not been “litigated” in
Delaware; that even if it had been raised by the three
appearing individual objectors, Delaware preclusion law
would permit a collateral challenge by an absent class
member; and finally, that in any event the due process clause
required inquiry into adequacy of representation before the
Delaware judgment could be given preclusive effect (App.
44-47a). Judge Norris focused at length on the inadequate
representation by Delaware class counsel: “This was not
merely ‘inadequate’ representation, it was hostile
representation that [only] served the interests of counsel in
getting a fee...” (emphasis supplied) (App. 80a). “Indeed,
Delaware counsel’s representation . . . surpassed inadequacy
and sank to the level of subversion” (emphasis supplied)
(App. 70a). In dissent, Judge O’Scannlain made no effort to
defend the conduct of class counsel in Delaware. The
Situation suggested: “... dare I say, collusive, conduct of
the Delaware class attorneys” (emphasis in the original)
(App.89a). But, he said, “regrettably” (App. 83a), the
Delaware court had resolved the issue, and its resolution
barred any further inquiry.

6

4. Epstein III. Two days after Epstein II was filed, Judge
Norris resigned. Respondents moved for rehearing, Judge
Sidney Thomas was assigned to the panel, rehearing was
granted, and the prior opinion was withdrawn on the votes
of Judges O’Scannlain and Wiggins. Both judges, in different
ways, believed that in Matsushita, despite footnote 5, this
Court implicitly directed them to enforce the Delaware
judgment. Judge Thomas dissented.

Judge O’Scannlain now concluded that although this
Court’s opinion “did not include an express statement that
the Delaware judgment in question did not violate due
process, that conclusion was logically necessary to the
Court's holding” (emphasis supplied.) (App. 10a). He said
that footnote 5 did not indicate otherwise (App. 13a-14a),
and Justice Ginsburg’s statement that the issue remained open
was dismissed as being “part of her dissent” (App. 13a).
Judge Wiggins’ concurrence emphasized that, while Judge
Norris had “convincingly” shown the existence of “hostile”
representation by Delaware class counsel (App. 20a-21a),
he now believed that this Court had sent “unmistakable
Signals” that “the Delaware courts likely had already
conclusively resolved the due process issue” (App. 21a). He
concluded that this resolution must be given full faith and
credit in federal court, “irrespective of whether we agree with
that determination” (App. 22a).

The court offered another -- and a far reaching
proposition (App. 15a-19a). So long as the state has the
functional equivalent of Rule 23, absent class members are
bound by the class action judgment no matter how inadequate
the class representation in fact:

Simply put, the absent class members’ due process
right to adequate representation is protected not
by collateral review, but by the certifying court
initially, and thereafter by appeal within the state

assem aera eres

7

system and by direct review in the United States
Supreme Court.?

(App. 16a). Since the great majority of states have copied
Rule 23 or adopted its functional equivalent, this means that
there can be no collateral challenge based upon inadequate
representation in fact.

Judge Thomas’s dissent (App. 22a-31a) said that “the
actual representation provided by Delaware class counsel was
inadequate for the reasons persuasively detailed in Judge
Norris’s opinion on remand” (App. 26a). This conclusion
encompassed the determination that Delaware counsel had
given the Delaware courts a “misleading and incorrect”
analysis of the federal litigation claims (App. 26a). But he
also focused upon the purported Delaware class
representatives. There was, he noted, no “record evidence
that the class representatives were even members of the class”
( App. 22a). Moreover, even if they were, at “the time
settlement occurred, the statute of limitations prevented the
Delaware class from litigating the federal claims in any
Court” (App. 25a). Such class representatives “had absolutely
no incentive to obtain fair valuation of the federal claims,
because of their inability to assert the claims.” Jbid. The
panel’s holding, he said, constituted a “license to those who
would run to a favorable and remote state court to obtain
settlements premised on bargain-basement valuations of
federal claims, even when those claims clearly predominate
over potential state causes of action” (App. 31a).

? Collateral review for constitutional sufficiency of a class
action judgment is limited to a consideration of “whether the
procedures in the prior litigation afforded the party against whom
the earlier judgment is asserted a ‘full and fair opportunity’ to litigate
the claim or issue,” he said (App. 17a) (emphasis added).

8

REASONS FOR GRANTING THE WRIT

The court of appeals enforced a class action judgment
against absent class members despite the published
conclusions of four circuit judges -- employing such terms
as “hostile” and “subvers[ive]” and “collusion” -- that the
class received inadequate representation. This decision
conflicts with the settled law of this Court and other courts
of appeals. Given the increasing willingness of, particularly
state, courts to settle complex national class action litigation,
and, as here, the frequent presence of competing and
overlapping class actions in different courts, with “global”
settlements available to representatives who submit the
lowest bid, appropriate determination of adequate
representation is essential. The decision below will have
exceptional influence, if not reviewed. This Court’s guidance
is needed.

I. The rule announced by the court below states an
unprecedented and wrong standard for evaluating an absent
class member’s claim that a state court judgment is not
entitled to preclusive effect because it was obtained in
proceedings where he or she was not adequately represented.
By focusing solely on the procedure available under a state
law rather than whether there was actually “adequate
representation at all times” the announced rule eviscerates
this Court’s settled class action jurisprudence. Jn the Ninth
Circuit, if the opinion below stands, adequate representation
does not mean adequate representation in fact by faithful
class representatives; it means no more than the bare
existence of adequate procedures. This is a fundamental error
in need of this Court’s correction. If absent class members
are to be bound by representation, this Court’s cases teach
that the absent class members must receive adequate
representation in fact by faithful champions, and not simply
have adequate procedures available to them. Otherwise, the
class action mechanism creates an intolerable risk of abuse.

9

(i) The conclusion reached by the court below conflicts
with a vast body of law. Since Hansberry v. Lee, 311 U.S.
32, 43 (1940), a collateral attack case, it has been clear that
absent class members are bound only if “they are in fact
adequately represented.” (Emphasis supplied). See also
Richards v. Jefferson County, Alabama, 517 U.S. 793, 800-
801 (1996), another collateral attack case, quoting from
Hansberry. Adequate representation must exist “at all times.”
Phillips Petroleum Co. v. Shutts, 472 U.S. U.S. 797, 812
(1985). See also Ortiz v. Fibreboard Corp., 119 S.Ct. 2295,
2315 n.24 (1999) (quoting Shutts “at all times” language).
As Justice Ginsburg said, 516 U.S. at 395, Shutts’s phrase
“at all times” means that “the class representative's duty to
represent absent class members adequately is a continuing
one.” From Hansberry through Ortiz, an invariable theme
runs through this Court’s cases: If absent members are to be
bound on the basis of representation, the class representatives
(plaintiffs and counsel) must in fact act as faithful champions
of the interests of class.

(ii) For the court below, class members must actively
monitor and intervene in the class proceeding to protect their
constitutional right to adequate representation. This is
directly contrary to Shutts. Shutts said that, unlike absent
defendants, absent class members are “not required to do
anything”, but could “sit back and allow the litigation to run
its course.” 472 U.S. at 810. Not so, according to the court
below. Rather, to protect their rights, absent class members
must hire counsel and actively monitor and intervene in all
class proceedings; otherwise they are bound.’ Simply put,

* Unlike non-appearing defendants who can collaterally attack
a judgment for want of in personam jurisdiction, absent class
members cannot make such an attack even though the existence of
adequate representation “at all times” is a condition necessary for
the existence of state court jurisdiction sufficient to bind absent class
members. See Martin v. Wilks, 490 U.S. 755, 765 (1989). (Generally,
the law imposes no duty to intervene in order to protect one’s rights.)

10

an absent class member is and must act like a party “at all
times.”

II. A judgment that violates due process is not entitled
to full faith and credit in “other state and federal courts.”
Kremer v. Chemical Construction Corp., 456 U.S. 461, 482
(1982); 516 U.S. at 388 (Ginsburg, J.). The Delaware
procedures were “fundamentally flawed.” 456 U.S. 480.
First, the Delaware court approved a class settlement without
making any inquiry into adequacy of representation. There
was no record evidence of any kind that, when they sought
certification as class representatives, the putative Delaware
class representatives were even members of the putative class,
or that they held any claims when they sought certification
as class representatives, that were not barred by the statute
of limitations, as Judge Thomas observed (App. 25a-27a).
Second, the vice chancellor placed the burden of proof on
the individual objectors in the Delaware proceeding to prove
inadequate representation, 516 U.S. at 399, Ginsburg, J.,
even though he recognized that “suspicions [of collusion]
abound.” Respondents conceded in this Court (App. 11 1a)
that the burden of proof on adequate representation rests upon
those who would create class certification and then a class
settlement, not upon objectors who have never been
designated class representatives. See also Amchem Products,
Inc. v. Windsor, 521 U.S. 591, 614 (1997). Moreover, the
vice chancellor confused the need for proof of actual
collusion with proof of inadequate representation.

III. Despite the Court’s explicit statement that the issue
of adequate representation would not be “address[ed]”
because it was “outside of the scope of the question
presented” and was “not the basis for the decision below,”
516 U.S. at 379 n. 5, a panel majority, for differing reasons,
believed that this language need not be taken at face value
and that certain passages in this Court’s opinion intimated
or necessarily meant that petitioners’ constitutional claims

1]

should no longer be considered. This is profoundly alarming
doctrine. Just as the lower courts must “leav[e] to this Court
the prerogative of overruling its own decisions,” Rodriguez
de Quijas v. Shearson/American Express, Inc., 490 U.S. 477,
484 (1989), so too must they leave to this Court alone the
authority to say what it has and has not decided. Retention
of this Court’s prerogative is vital if this Court’s dispositions
are to have publicly intelligible meaning, and not simply
constitute a trap for litigants who have unaddressed claims.
It is an especially vital aspect of this Court’s settled practice
of limited grants of review. And it implements this Court’s
role as a “court of final review and not first view,” 516 U.S.
at 399 (Ginsburg, J.).

POINT I. A CLASS JUDGMENT BASED UPON
INADEQUATE REPRESENTATION IN FACT IS NOT
ENTITLED TO FULL FAITH AND CREDIT

The court below formulated a proposition deeply at
variance with settled understanding: if the state court has
Rule 23 or its functional equivalent (and all do), absent class
members are conclusively bound by the judgment, no matter
how inadequate the representation in fact.‘

Simply put, the absent class members’ due process
right to adequate representation is protected not
by collateral review, but by the certifying court

* Ignoring Justice Ginsburg’s analysis of Delaware law and
respondents’ concession in this Court, referred to by Justice
Ginsburg, 516 U.S. at 399 n.11, that Delaware would entertain a
motion under Delaware Rule 60 to challenge inadequate
representation, the majority below concluded that Delaware would
not permit such a challenge (App. 15a n.6). In so holding, the court
cited Prezant v. De Angelis, 636 A.2d 915 (Del. Supr. 1994) but
ignorea Prezant’s holding that due process required record based
findings about the class representatives. 516 U.S. at 397 (Ginsburg,
J.). Prezant, in turn, influenced this Court’s holdings in Amchem
Products and Ortiz, as to the recessity for adequate class plaintiffs.

12

initially, and thereafter by appeal within the state
system and by direct review in the United States
Supreme Court.

(App. 16a). Since all states satisfy this condition, there is
no collateral review in any court based upon inadequate
representation in fact. The court's opinion is in direct conflict
with an unbroken wall of authority in this Court from
Hansberry v. Lee on down through Amchem Products and
Ortiz v. Fibreboard. These opinions make clear that the class
representatives (named plaintiffs and counsel) must be
faithful champions of the interests of the class, if absent
members are to be bound by the conduct of their
“representatives”. Insistence upon this requirement is of
overriding importance in the context of classes certified for
settlement purposes only. Amchem Products, Inc. v. Windsor,
521 U.S. 591, 621 (1997); Ortiz, 119 S.Ct. at 2316.

1. In Hansberry v. Lee, a collateral challenge decision,
the Court said that absent class members could be bound
only if they appeared or were “in fact adequately represented
...” 311 U.S. at 43 (italics added).* This was described as
“familiar doctrine.” Jd. at 42-43. In Richards v. Jefferson
County, Alabama, 517 U.S. 793, this Court began its opinion

* The court below incorrectly treats Hansberry v. Lee as having
focused only upon matters of procedure governing the certification
and conduct of class actions (App. 16a-17a). In Hansberry, nothing
wrong was with the state court class action procedures. Indeed, in
that proceeding there had been objectors who were in a position to
make all available arguments, Hansberry, 311 U.S. at 41-43, and
the collateral challenge was sustained on the substantive ground of
inadequate representation in fact, i.e., conflict of interest. See
Phillips Petroleum Co. v. Shutts, 472 U.S. at 808 n.1. (Class
representatives’ interests in Hansberry were in conflict with the
interests of parties in the second action). To the same effect are the
Court's more recent decisions in Amchem, 521 U.S. at 625-28 and
Ortiz, 119 S.Ct. at 2318-21. Both decisions focused upon inadequate
representation in fact because of intra class conflict.

13

by stating that “In Hansberry v. Lee . . ., we held that it would
violate the Due Process Clause of the Fourteenth Amendment
to bind litigants to a judgment rendered in an earlier litigation
to which they were not parties and in which they were not
adequately represented.” 517 U.S. at 794 (emphasis
supplied). Later, in the opinion, at 800-801, the Court
expressly quoted Hansberry’s “in fact” language. The class
representatives must “adequately represent” the class “at all
times.” Shutts, 472 U.S. at 812 (emphasis supplied), language
that the court below never mentions. See also Ortiz v.
Fibreboard Corp., 119 S.Ct. at 2315 n.24 (quoting the Shutts
language). In holding to the contrary, the Ninth Circuit's
opinion conflicts with the unanimous view of the lower
courts, including the courts of appeals. As Judge Becker,
for example, said in Real Estate Title,’ “it would violate due
process to bind an absent class member to a judgment from
a proceeding in which the member was not adequately
represented.” Such decisions clearly establish that the
question of adequate representation in fact, not just upon

* See, for example, Gonzales v. Cassidy, 474 F.2d 67, 75 (Sth
Cir. 1973), discussed by Justice Ginsburg, 516 U.S. at 395. See
also In re “Agent Orange” Product Liab. Litig., 996 F.2d 1425 (2nd
Cir. 1993), permitting but rejecting on the merits a due process
collateral attack on a prior opt-out settlement. /d. at 1432-1433 er
seq. The court said that it “is axiomatic that a class action binds
absent members only so long as they were adequately represented
therein.” Jd. at 1435. “[A}fter judgment has been entered and
subsequently is invoked against the class, the adequacy of
representation is open to examination.” F. James, G. Hazard, and J.
Leubsdorf, Civil Procedure 631 (4th ed. 1992) (citing Restatement
(Second) of Judgments § 42, comments e and f). See 3 Newberg
and Conte, Newberg on Class Actions, §16.25 at pp. 16-133-137
(3d ed. 1992) (collecting authorities recognizing collateral attack
from virtually every circuit).

? In re Real Estate Title and Settlement Services Antitrust
Litigation, 869 F.2d 760, 767 (3rd Cir.), cert. den., 493 U.S. 891
(1989).

14

the presence of procedures for determining adequate
representation, are a necessary and appropriate basis for
inquiry on collateral review.*®

Adequate representation means adequate representation,
not adequate procedures; it means vigorous representation
in fact by faithful champions of interests of the class, not
simply facially adequate procedures. Otherwise, the class
action mechanism then becomes a license for grave abuse.
As Judge Norris, citing Hansberry, said, “No procedure can
reliably protect an absent plaintiff who does not in fact have
an adequate representative in court championing his cause”
(emphasis supplied) (App. 56a).

2. The court below eviscerates Shutts in a second way.
The effect of its holding is that, to protect their constitutional
right to adequate representation “at all times”, absent class
members must actively monitor and indeed intervene in the
class proceeding, otherwise they are bound however
inadequate the representative in fact. Absent class members
must, in short, retain counsel and monitor and intervene in
every class action affecting their interests. This conclusion

* The court refers to opinions from the First and Third Circuits.
Nothing in their holdings or reasoning supports his far reaching
proposition. In Nottingham Partners v. Trans-Lux Corp., 925 F.2d
29 (ist Cir. 1991) federal plaintiffs, upon commencement of a
subsequent state action, intervened in the state action and litigated
these claims all the way to the Delaware Supreme Court. They were
properly barred by preclusion principles from relitigating those
issues in the pending federal proceeding. Hansberry v. Lee, supra.
In the Third Circuit’s divided holding in Grimes v. Vitalink, 17 F.3d
1553 (3d Cir.), cert. den. 513 U.S. 986 (1994), a majority there said,
id. at 1558, that the federal litigants conceded that they had, in fact,
previously appeared and litigated the very issue in Delaware (in
which case, of course, there would be preclusion). Grimes at the
very least “leav[es] open whether one who did not object in state
court could do so in federal court.” Marcus and Sherman, Complex
Litigation, p. 103 (Supp. 1997).

15

directly contradicts Shutts. There, rejecting attempts to
analogize absent class members to defendants for purposes of
establishing in personam jurisdiction, this Court said that, unlike
a defendant, an absent class plaintiff “is not required to do
anything.” 472 U.S. at 810. For the court below, however, if an
absent class member does not “do anything” before the class
action judgment is entered, he is forever barred from challenging
it. Absent class members are, therefore, in a position worse than
defendants who, if they do not appear, can make a collateral
challenge to the existence of in personam jurisdiction.

POINT Ii. THE DELAWARE CLASS JUDGMENT
PROCEEDING WAS FUNDAMENTALLY FLAWED

A judgment that violates due process is not entitled to full
faith and credit “‘in other state and federal courts.” Kremer v.
Chemical Construction Co., 456 U.S. at 482; see also 516 U.S.
at 388 (Ginsburg, J.). Here, the procedures were “fundamentally
flawed.” 456 U.S. at 480. While the vice chancellor’s order
recited that there was adequate representation, the class notice
had not listed this as an issue; and there was no evidence with
respect to the adequacy of representation by class counsel or
the named plaintiffs. In particular, there was no record evidence
that, at the time they sought certification as class representatives,
the piaintiffs were even members of the class, or that they held
any federal claims that were not barred by the statute of
limitations. There must be evidence of some kind in the record,
Ortiz 119 S.Ct. at 2316, of the existence of those conditions
that are indispensable to representative status. Moreover, the
vice chancellor placed the burden of proof on “collusion” on
the objectors, not on the proponents of class certification. The
“finding” or recital of adequate representation cannot overcome
the glaring evidentiary defects.°

° “[I}t must be taken to be established that a court cannot
conclude all persons interested by its mere assertion of its own power
(Cont'd)

16

1. Much of the various opinions below focused upon
the conduct of Delaware class counsel. The judges below
condemned it. But, as Judge Thomas recognized, Amchem
Products once again makes clear that the class representatives
also must be adequate (App.24a-25a). This is a
“constitutional fact” the existence of which is necessary if
absent class members are to be bound on the basis of
representation alone. No court can enforce class action
judgment without making a threshold due process inquiry
into what the record shows with respect to the purported class
representatives. This inquiry is especially crucial when the
representatives have been certified for settkement purposes
only. Amchem Products, 521 U.S. at 621; Ortiz, 119 S.Ct. at
2316. The panel majority, over Judge Thomas’ dissent,
declined to make that inquiry. Had it done so, it would see
that there is not even ascintilla of evidence that would permit
an inference that, at the time they sought certification as class
representatives, the putative class representatives were
adequate.

(i) As Judge Thomas said, nothing in the record before
the Delaware court showed that the purported Delaware
representatives were even members of the class at the time
they sought certification as class representatives (App. 22a).
The Delaware judgment thus squarely conflicts with this
Court’s precedents, which state categorically that “a class
representative must be part of the class.” Amchem Products
v. Windsor, 521 U.S. at 625-26; General Telephone Co. of
Southwest v. Falcon, 457 U.S. 147, 156 (1982).'°

(Cont’d)
... even where its power depends upon a fact and it finds the fact.”
Chicago Life Ins. Co. v. Cherry, 244 U.S. 25, 29 (1917).

0 “TA]ctual, not presumed, conformance with Rule 23(a)
remains, however, indispensable.” General Telephone Co. of
Southwest v. Falcon, 457 U.S. at 160. This means that, “[a] class is
(Cont’d)

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Hist ony

17

(ii) Even if the Delaware representatives had been shown
to be class members, it is indisputable, as Judge Thomas
also noted (App. 25a), that all their individual federal claims
were barred by the statute of limitations. At the point at
which these Delaware class “representatives” sought
certification as class representatives, they had no claims that
they could litigate -- state or federal -- in any court.'' The
Ninth Circuit decision conflicts with Great Rivers Co-op of
SE Iowa v. Farmland Indus., Inc. 120 F.3d 893, 899 (8th Cir.
1997), which held that class members with time barred claims
could not represent the class.'* More importantly, the
(Cont’d)
not maintainable as a class action by virtue of its designation as
such in the pleadings.” Jn re American Medical Systems, Inc., 75
F.3d 1069, 1079 (6th Cir. 1996). “To make an informed and
independent judgment,. . . the court needs facts, not allegations.”
Protective Committee for Independent Stockholders of TMT Trailer
Ferry, Inc. v. Anderson, 390 U.S. 414, 437 (1968). Even if allegations
in the complaint alone sufficed, the allegations of the Delaware
complaints are insufficient. They are unverified. Moreover, the
complaint alleges that the putative class representatives owned MCA
shares at some point during the class period, not that they tendered
their shares and, thus, potentially had rights under federal law.

'' Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501
U.S. 350 (1991), holds that 1934 Act claims must be brought within
one year of discovery. Under American Pipe and Constr. Co. v.
Utah, 414 U.S. 538 (1974) and Crown, Cork & Seal Co., Inc. v.
Parker, 462 U.S. 345 (1983), the statute is tolled once the complaint
is filed only until the district court denies certification. The district
court did so in April of 1991 and again on September 6, 1991. When
the settlement was announced in October 1992, the statute had run
even if September 6, the second Epstein certification denial, is
viewed as the trigger date.

'? Moreover, even if the Delaware plaintiffs could have asserted
individual federal claims, any class action at this point in time would
have been barred by limitations. Tolling does not extend to new class

(Cont'd)

18

certification of a class represented by representatives and
counsel without any litigitable claims — state or federal —
“did not support the essential premises” required for
certification. Ortiz, 119 S.Ct. at 2316. The Delaware
certification order thus conflicts with this Court’s decisions
in Amchem Products and Ortiz, both of which require that
the putative class representatives must have litigable claims,
and that class counsel’s relationship to the claims not be
conflicted.

We submit that inadequate representation exists as a
matter of law when a class representative seeks certification
for the purpose of releasing claims that “the representative”
has no power to assert in any court, and when the
representative thus sits at the bargaining table only because
defendants have for their own purposes refrained from filing
a dispositive motion. As Judge Thomas observed, such
“[c]lass representatives ha[ve] absolutely no incentive to
obtain fair valuation of the federal claims... .” (App.25a).

2. The vice chancellor not only made no inquiry into
adequacy of representation; instead, he placed the burden of
proof on the objectors to prove inadequate representation.
516 U.S. 399 (Ginsburg, J.). They, of course, were not
appointed to represent the absent class members and make
no commitment to undertake the fiduciary duties associated
with that representation. In this Court respondents conceded
that the burden of proof ‘s on those who propose class
certification and settlement, not those who oppose it (App.
11la). Allocation of burden of proof surely matters where
“suspicions [of collusion] abound.” Respondents made no

(Cont'd)

action claims. See Andrews v. Orr, 851 F.2d 146, 149 (6th Cir. 1988):
“The courts of appeals that have dealt with the issue appear to be in
unanimous agreement that the pendency of a previously filed class
action does not toll the limitations period for additional class actions
by putative members of the original asserted class.”

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19

effort — none — to assuage the vice chancellor’s concerns. It
is, accordingly, irrational for respondents to argue that they
discharged their burden when “suspicions [of collusion]”
went unaddressed. Moreover, the vice chancellor employed
the wrong constitutional standard. He confused proof of
adequate representation with proof of collusion. Only the
former is constitutionally relevant; and, quite clearly, that
can be demonstrated without proving actual collusion
between the class representatives and the defendants.

POINT III. THIS COURT HAS NOT DIRECTED
THE COURT BELOW TO ENFORCE A CLASS
ACTION JUDGMENT SECURED BY INADEQUATE
REPRESENTATION.

At oral argument, petitioners sought to demonstrate
inadequacy of representation, but this Court admonished
counsel not to argue “on some peripheral issues that aren’t
here” (App. 113a). After that interchange, it was not
surprising that the Court’s opinion refused to address the
issue of adequacy of representation because it was “outside
the scope of the question presented” and was “not the basis
for the decision below.” 516 U.S. at 379 n.5. Nonetheless
the panel majority believed that footnote 5 need not be taken
at face value. Judge Wiggins believed that this Court sent
“unmistakable signals” to enforce the Delaware judgment,
and Judge O’Scannlain said that it was a “logically
necessary” premise of this Court’s disposition in Matsushita.
These opinions empty footnote 5 of any meaning. Far more
important, they compromise the public meaning of this
Court’s dispositions by setting traps for litigants as to what
has and what has not been decided, sub silentio, despite this
Court’s explicit reservation of the very issue; they improperly
impinge upon this Court’s power to make limited grants of
review. And they undercut this Court’s role as a court of
final review, not first view, which generally means that the

20

Court does “not decide in the first instance issues not decided
below.” NCAA v. Smith, 119 S.Ct. 924, 930 (1999).

Footnote 5 is a holding of this Court, one that was
necessary for the full disposition of the petition since, in
principle, a respondent may defend the judgment of the court
below on any ground consistent with the record. E.g., Bennett
v. Spear, 520 U.S. 154, 166 (1997) (citing Matsushita for
this proposition and the discretionary nature of the Court’s
authority in this respect). Just as the lower courts must
“leav[e] to this Court the prerogative of overruling its own
decisions.” Shearson/American Express, 490 U.S. at 484,
so too they must leave to this Court alone the authority to
say what it has decided and what it has not. This Court has
repeatedly relied upon Matsushita for the “we do not decide”
proposition. '*

1. Judge Wiggins apparently believed that this Court had
held that the Delaware chancery court had resolved
conclusively the issue of adequate representation and that
was binding. This is wrong factually and constitutionally.
First, this Court did not make such a determination. As Judge
Thomas (App. 28a-30a), echoing Judge Norris’s earlier
exposition (App. 42a-44a), showed, the Delaware court had
not resolved the issue. Moreover, the conduct of the
Delaware objectors could not conclusively bind absent class
members. “Objectors are objectors, not class representatives”
(App. 45a). As Judge Thomas noted, “The individual
objectors who voluntarily appeared at the fairness hearing
were not authorized by the absent class members to represent

'3 E.g., Holly Farms Corp. v. NLRB, 517 U.S. 392, 400 n.7
(1996). In Cass County, Minnesota v. Leech Lake Band of Chippewa
Indians, 524 U.S. 103, 1911 n.5 (1998), the Court expressly relied
upon footnote 5 to justify the Court’s refusal to decide an issue
outside the scope of the question presented and that had not been
addressed by the court below.

Ce eT ee ee eee

CN ont ae ae ne Se ae

Ti tea

21

their interests, nor were they certified by the state to do so”
(emphasis added) (App. 30a). This fact alone is fatal to
attaching conclusive legal significance to the conduct of the
Deiaware objectors. Richards v. Jefferson County, Alabama,
517 U.S. at 801 (1996) (noting that plaintiffs in prior proceedings
had not been designated as class representatives and thus could
not bind absent class members). Additionally, if an objector
could conclusively bind all other class members, “surely no
objector could accomplish what a class member could not:
binding a class without Satisfying due process requirements.”'4

2. Abandoning his first opinion, Judge O’Scannlain said
that this Court itself had itself resolved the due process issue.
The “conclusion [that the Delaware judgment satisfied due
process], was logically necessary to the Court’s holding” (App.
10a). This is a striking analysis; if the Court had decided the
due process issue implicitly, the explicit reservation in footnote
5 is meaningless. It is, however, his logic, not this Court’s
perception, that is flawed. There is no inconsistency in this
Court having said: Respondents in Matsushita advanced two
reasons for not enforcing the judgment. The first reason (here,
State court release of federal claims within the exclusive
jurisdiction of the federal courts) is not valid. But we do not
address the question whether the second reason (inadequate
representation) justifies not giving full faith and credit to that
judgment. We are a court of last resort. The second issue is
outside the question presented, and, it was not the basis of the
decision below."

'* Monaghan, Antisuit Injunctions And Preclusion Against
Absent Non Precedent Class Members, 98 Colum. L. Rev. 1148,
1199 (1998). “The Epstein plaintiffs were not adequately represented
in the Delaware state court proceedings by either the class
representatives or the objectors . . .” (App. 31a) (Thomas, J.).

'S Judge O’Scannlain’s brief reliance upon Kremer v. Chemical
Construction Corp., 456 U.S. 461 (1982) (App. 10a, 17a), to support
(Cont'd)

22

Judge O’Scannlain also insists that “if the Epstein
appellants’ contention that the Delaware judgment is
constitutionally infirm were true, Matsushita would be an
advisory opinion” (App. 12a). This is plainly wrong. As Judge
Thomas noted (App. 30a n.3), this Court conclusively resolved
the statutory issue upon which it granted review. Nothing more
is required to satisfy Article III. Otherwise, this Court’s practice
of limited grants of certiorari, as well as remands for further
proceedings, are unconstitutional. The order entered by the
Court, remanding for proceedings “consistent [or not
inconsistent] with this opinion,” 516 U.S. at 387, is fully
consistent with this reasoning, and it is a recurring one. See
Hart & Wechsler’s, The Federal Courts in the Federal System,
507-508 (4th ed. 1996). That mandate leaves the court below
entirely free to pass on any undetermined questions, and this
frequently happens because limited grants by this Court are a
commonplace. /d. at 487-89. That, on remand, the final
judgment below might remain unaffected is quite common and
always has been. See, for example, State Tax Commission of
Utah v. Van Cott, 306 U.S. 511 on remand, 98 Utah 264, 96
P.2d 40 (1939).'°

(Cont'd)

his “logically necessary” holding is mystifying. In Kremer, so far as
relevant here, a federal court litigant challenged enforcement of a prior
State court judgment because relevant state procedural law was, he
alleged, “fundamentally flawed.” Jd. at 480. Noting that a
constitutionally infirm judgment cannot be given full faith and credit,
id. at 482, this Court entertained tae challenge; held that the state
procedures did satisfy due process; and accordingly, it accorded full
faith and credit to the state court judgment. 456 U.S. at 483-85. The
challenge is to the class representative’s failure to provide adequate
representation “at all times”. Shutts, supra. If that condition does not
exist, the state court class action judgment violates due process and
cannot be accorded full faith and credit. 516 U.S. at 388, Ginsburg, J.

'© Later in his opinion, Judge O’Scannlain says, “We further note
that where the Court leaves an issue open on remand, it often expressly
(Cont'd)

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23

CONCLUSION
The petition for a writ of certiorari should be granted.

Respectfully submitted,

Roger W. Kirby Henry Paul Monaghan

Counsel of Record Harold Edgar

Peter S. Linden 435 West 116th Street

KIRBY McINERNEY New York, New York 10027
& SQUIRE, LLP (212) 854-2644

830 Third Avenue, 10th Floor
New York, New York 10022
(212) 371-6600

Attorneys for Petitioners

Dated: September 3, 1999

(Cont'd)

States that it is done so” (App. 14a). This is an obvious makeweight.
“Often” is the key word here, otherwise the court has fashioned a novel
clear statement rule: Unless magic words are used, this Court will be
deemed to have set a trap for the unwary. Many decisions do not use
these talismanic words, but it is apparent that issues remain open on
remand. E.g. Jefferson v. City of Tarrant, Ala., 118 S.Ct. 481, 483
(1997); Pounders v. Watson, 521 U.S. 982, 989-990 (1997); Suiturn v.
Tahoe Regional Planning Agency, 520 U.S. 725, 728-29 (1997); General
Motors Corp. v. Tracy, 519 U.S. 278, 305 n. 13 (1991). Moreover,
insistence upon a magic words approach completely empties footnote
5 of any meaning.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_0004%3A1. Public record. Not legal advice.