ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA District Court Judge: The Hon. Donetta W. Ambrose (Misc. Docket No. 96-179)
Before: Ambro, Fuentes, and Garth, Circuit Judges.
The opinion of the court was delivered by: Julio M. Fuentes Circuit Judge
Argued: December 12, 2003
In December 1999, Plaintiff-Appellant Metropolitan Life ("Metlife") settled an MDL federal class action ("the MDL case") with plaintiffs who had filed actions over allegedly illegal sales practices. In the case before us, Appellees, all represented by the firm Behrend and Ernsberger ("Behrend"), are opt-out plaintiffs pursuing their own individual suits in Pennsylvania state courts against Metlife for allegedly improper sales practices. In those state court proceedings, Appellees*fn1 have been allowed to conduct discovery of Metlife's nationwide sales practices–including information specifically related to litigants from the MDL case–on the grounds that the sales practices are potentially relevant to Appellees' individual claims. In October 2001, Metlife approached the District Court for an injunction barring Appellees from conducting such discovery, or from asserting any claim relating to the alleged illegal nationwide practices, on the grounds that it would disturb, or even effectively relitigate, the MDL case that was settled by Metlife in federal court.
The Magistrate Judge issued a Report and Recommendation advising an injunction on the grounds that Plaintiffs were effectively relitigating the illegality of the nationwide practices covered by the MDL case settlement. Upon reconsideration, however, the Magistrate Judge reversed his Recommendation: specifically, while Appellees may have abused Metlife through overbroad discovery requests and allegations in their complaint, they nonetheless had discrete individual claims, and thus it was up to the state courts to decide whether Appellees' specific discovery requests were relevant to those claims. The District Court adopted the Report and Recommendation in its entirety.
The Anti-Injunction Act dictates that a federal court "may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments." 28 U.S.C. § 2283. Thus, federal courts are statutorily prohibited from enjoining state court proceedings except in three narrowly excepted categories of cases; the corresponding affirmative empowerment to issue injunctions in these three categories of cases derives from the All-Writs Act, 28 U.S.C. § 1651(a). In re Prudential Ins. Co. of Am. Sales Practice Litig., 261 F.3d 355, 365 (3rd Cir. 2001) (hereinafter referred to as "Prudential I"). Metlife argues that the District Court had the authority to enjoin Appellees' claims because the instant case falls into either the second or third category of cases: namely, the injunction is either 1) necessary in aid of the District Court's jurisdiction over the MDL case, or 2) necessary to prevent relitigation of the settled claims in the MDL case.
Relying on Prudential I, Metlife contends that Appellees can be enjoined from making any claim or using any evidence related to the claims settled in the MDL case in order to keep the settlement from being disturbed. In Prudential I, the plaintiffs, the Lowes, had four policies with Prudential that fell within the defined parameters of a nationwide class action against Prudential that settled in October 1996 in the District of New Jersey. Id. at 359-61. The Lowes chose to keep two policies within the class action, but to opt out with the other two policies, meaning that they would reap the benefits of the settlement for two of their policies but still retain the option to litigate the other two claims. Id. at 361. The Lowes' state-court complaint based on the opted-out policies contained numerous references to Prudential's nationwide policy, and the Lowes sought discovery over those practices as relevant to the opted-out individual claims. Id. at 362-63. Prudential obtained an injunction from the New Jersey District Court enjoining the Lowes from undertaking any proceeding in state court "that is based on, relates to or involves facts and circumstances underlying the Released Transactions in the Class Action." Id. at 363 (internal quotations omitted). Our Court affirmed this injunction under the Anti-Injunction and All-Writs Acts. Id. at 369-70.
Metlife argues that the instant case is virtually identical to Prudential I, as the injunctions sought and the state-court complaints at issue are extremely similar in both cases. As the District Court recognized, however, the crucial distinction between Prudential I and the case before us is that the Lowes were parties to the Prudential I settlement because they did not opt out all of their claims. In contrast, Appellees did opt out all of their claims, and were therefore not parties to the MDL case settlement. Metlife tries to downplay the salience of this distinction, but a close reading of Prudential I makes it clear that the Lowes' participation in the settlement was the dispositive factor in the case. Id. at 366 ("We must determine whether settlement of claims the Lowes had under the Class Policies precludes them from pursuing claims in Florida purportedly arising from the [opted-out] Policies"), 367 ("the Lowes clearly released Prudential from any claims 'based on,' 'connected with,' 'arising out of,' 'or related to, in whole or in part' their two Class Policies"), 369 ("When the Lowes reviewed the Release and the Class Notice, they surely must have realized that, even though they could exclude certain policies from the settlement while including others, doing so would jeopardize their ability to prove claims relating to the [opted-out] Policies. The district court was not willing to release them from their bargain; neither are we").
Metlife urges the Court to look beyond the specific facts of Prudential I and embrace a larger goal of protecting class action defendants from having to repeatedly defend against allegations relating to claims they have already settled. Metlife claims that the Prudential I court endorsed this larger goal when it cautioned that state suits concerning the settled claim "could number in the millions." Id. at 367. We believe, however, that Metlife takes this comment out of context; the Prudential I court clearly confined that warning to the context of state-court plaintiffs who had already, like the Lowes and unlike Appellees here, already signed on to the federal settlement. Id. ("allowing the Lowes to prosecute their civil claims in the Florida court would allow an end run around the Class ...