261 F.3d 355 (3rd Cir. 2001), 00-1389, In re In re Prudential Ins. Co. of America Sales Practice Litigation

Docket Nº:00-1389
Citation:261 F.3d 355
Case Date:August 02, 2001
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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261 F.3d 355 (3rd Cir. 2001)



No. 00-1389

United States Court of Appeals, Third Circuit

August 2, 2001

Argued: December 5, 2000

Appeal from the United States District Court for the District of New Jersey (Civil No. 95-cv-04704) District Judge: Hon. Alfred M. Wolin

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[Copyrighted Material Omitted]

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Robert B. Miller, Esq. (Argued) Teri L. DI Giulian, Esq. Bedzow, Korn, Brown, Miller &

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Zemel, P. A. P. O. Box 8020 Hallandale Beach, Florida 33008-8020 Attorneys for Appellants, Marvin and Alice Lowe

Reid L. Ashinoff, Esq. (Argued) Michael H. Barr, Esq. Lorie A. Chaiten, Esq. Deborah H. Renner, Esq. Sonnenschein Nath & Rosenthal 1221 Avenue of the Americas New York, New York 10020 Alan E. Kraus, Esq. Riker, Danzig, Scherer, Hyland & Perretti, Llp Headquarters Plaza One Speedwell Avenue Morristown, New Jersey 07960 Attorneys for Appellee, The Prudential Insurance Company of America

Before: McKEE, Circuit Judge, ROSENN and CUDAHY,[*] Senior Circuit Judges


McKEE, Circuit Judge.

This appeal arises in the wake of the settlement of a nationwide class action against The Prudential Insurance Company of America. Two policyholders who were members of the class appeal the district court's order enjoining them from prosecuting suits they filed in state court in Florida based upon policies that were eligible for inclusion in the nationwide class, but which the plaintiffs excluded from the terms of the class settlement. For the reasons that follow, we will affirm.


A large group of policy holders started a nationwide class action against Prudential Life Insurance Company alleging that Prudential agents had engaged in deceptive sales practices.

The class is comprised of [over 8 million] Prudential policyholders who allegedly were the victims of fraudulent and misleading sales practices employed by Prudential's sales force. The challenged sales practices consisted primarily of churning,2 vanishing premiums3 and

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fraudulent investment plans,4 and each cause of action is based on fraud or deceptive conduct.

148 F.3d at 289.

On October 28, 1996, the class representatives entered into a Stipulation of Settlement with Prudential. App. at 668-724. That same day, the district court entered an Order Conditionally Certifying the Class for Settlement Purposes, Designating Class Counsel and Class Representatives, Staying Pending Motions, Directing Issuance of Notice, Issuing Injunction and Scheduling Settlement Hearing (the "Certification Order"). App. at 725-38. In that Certification Order, the district court also conditionally certified the following for purposes of settlement:

a class that consists of all persons who own or owned at termination an individual permanent whole life insurance policy issued by Prudential or any of its United States Life insurance subsidiaries during the Class Period of January 1, 1982 through December 31, 1995 (the "Policy" or "Policies"), except as specifically described below [not relevant here] ("Policyholders"), and do not timely exclude themselves from participating in the settlement ("Class Members" or the "Class").

App. at 727. The Certification Order also scheduled a date for a Settlement Hearing

to consider the fairness, reasonableness and adequacy of the proposed settlement and terms and provisions of the Stipulation, . . . and to determine whether the proposed settlement and the Stipulation should be finally approved by the Court.

Id. at 729. In addition, the Certification Order required that Prudential provide Class Notices to all policyholders. The court required that the Class Notice

(i) contain a short, plain statement of the background of the Actions, the conditional Class certification and the proposed settlement, (ii) describe the proposed forms of relief, (iii) explain the procedures for receiving and participating in the proposed forms of relief, (iv) explain Class Members' rights of exclusion,

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objection and appeal and (v) state that any relief to Class Members is contingent on the Court's final approval of the proposed settlement.

Id. at 730.

The Class Notice also advised class members of the effect of the proposed settlement and referenced a Release that was attached as Appendix A. The Release stated in relevant part that "Class Members hereby expressly agree that they shall not . . . institute, maintain or assert . . . any and all causes of action, claims . . . that have been, [or] could have been, asserted by Plaintiffs or any Class Member against [Prudential] in any other court action . . . connected with . . . The Released Transactions5.. ." Id. at 765.

The Class Notice also told the Class Members how they could exclude themselves from the class and explained that policyholders who owned more than one policy could "choose to remain a Class Member with respect to some Policies, but . . . exclude [themselves] from the Class with respect to other Policies." Id.

Following the mailing of the Class Notice and the Fairness Hearing, the district court entered a Final Order and Judgment certifying a settlement and approving the settlement as fair, reasonable and adequate. In re Prudential Ins. Co. of America Sales Practices Litigation, 962 F.Supp. 450 (E. D. Pa. 1997). The Final Order also clearly informed all class members of the preclusive effect of the Settlement. It stated:

The terms of the Stipulation of Settlement and of this Final Order and Judgment, including all exhibits and supplemental exhibits thereto, shall forever be binding on, and shall have res judicata and claim preclusive effect in all pending and future lawsuits maintained by or on behalf of, the plaintiffs and all other class members, as well as their heirs, executors and administrators, successors and assigns. All claims for compensatory or punitive damages on behalf of class members are hereby extinguished, except as provided for in the Stipulation of Settlement.

Id. In addition, the district court expressly incorporated the Release into the Final Order. Id. at 566.

The Certification Order also contained the following injunction:

Prudential has offered evidence showing the existence of multiple class actions which could act to seriously impair this Court's ability to oversee the orderly and efficient management of the proposed nationwide class action settlement, and have demonstrated that without preliminary injunctive relief, many similar actions could proceed. Based on its familiarity with the issues in this lawsuit and the complexity of the proposed settlement, the Court finds that such actions may substantially impair the ability of this Court and the parties to implement the proposed settlement. . . Therefore, based on the record, including the legal and factual support for an injunction submitted by Prudential, this Court finds that an injunction is necessary to protect its jurisdiction, and hereby issues the following injunction, effective upon the mailing of the Class Notice, with Policyholders having been

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thus afforded the opportunity to exclude themselves from the Class:

All Policyholders and all persons acting on behalf of or in concert or participation with any Policyholder, are hereby enjoined from filing, commencing, prosecuting, continuing, litigating, intervening in or participating as class members in, any lawsuit in any jurisdiction based on or related to the facts and circumstances underlying the claims and causes of action in this lawsuit, unless and until such Policyholder has timely excluded herself or himself from the Class.

Id. at 735-36 (emphasis added).

The district court invoked the authority of the All-Writs Act, 28 U.S.C. § 1651(a), and the Anti-Injunction Act, 28 U.S.C. § 2283, in entering this injunction. The court reasoned that the injunction was "necessary in aid of its jurisdiction in order to effectuate the proposed settlement," id. at 735, and therefore permissible under the Anti-Injunction Act and authorized by the All-Writs Act. The court "retain[ed] exclusive jurisdiction as to all matters relating to administration, consummation, enforcement and interpretation of the Stipulation of Settlement and of [the] Final Order and Judgment, and for any other necessary purpose," Id., before dismissing the action pursuant to the settlement agreement.

We affirmed the district court's certification of the class and approval of the settlement in In re Prudential Ins. Co. of America Sales Practices Litigation, 148 F.3d 283 (3d Cir. 1998), cert. denied sub nom. Johnson v. Prudential Ins. Co. of America, 525 U.S. 1114 (1999), and Krell v. Prudential Ins. Co. of America, 525 U.S. 1114 (1999).


Marvin and Alice Lowe, the appellants here, are members of the class because they purchased five Prudential insurance policies between 1981 and 1989. Four of those policies were class eligible. The Lowes requested that two of the policies be excluded from the class (the "Excluded Policies"), but they remained class members as to two other policies (the "Class Policies").

Ten months after the district court certified the class and approved the nationwide settlement, the Lowes started an action in state court in Broward County Florida. There, they initially alleged that a Prudential agent had engaged in deceptive and fraudulent practices in connection with their purchase of all five insurance policies. However, because the Class Policies constituted Released Transactions under the terms of the class settlement, the Lowes filed an amended complaint in which they limited their claims to the two Excluded Policies. The Lowes' First Amended Complaint asserts a cause of action against Prudential for breach of fiduciary duty, violations of Florida's RICO statute, negligent misrepresentation, fraudulent...

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