Epstein v. MCA, Inc.
| Decision Date | 22 October 1997 |
| Docket Number | No. 92-55675.,92-55675. |
| Citation | 179 F.3d 641 |
| Parties | Lawrence EPSTEIN; John Linder; Jane Rockford, as trustee of the Michael J. Rockford Trust; Maurice Karlin; Ruth Karlin; Beth Ann Karlin; Bert P. Karlin, Plaintiffs-Appellants, v. MCA, INC.; Matsushita Acquisition Corporation; Matsushita Electric Industrial Co., Ltd.; Matsushita Holding Corporation; Lew Wasserman; Sidney J. Sheinberg, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Henry P. Monaghan (argued), Kaufman & Kirby, New York, New York; Roger W. Kirby, Kaufman Malchman Kirby & Squire, New York, New York, for the plaintiffs-appellants.
Barry R. Ostrager (argued), Simpson Thacher & Bartlett, New York, New York, for the defendants-appellees.
Before: WIGGINS, O'SCANNLAIN, and THOMAS, Circuit Judges.
Opinion by Judge O'SCANNLAIN; Concurrence by Judge WIGGINS; Dissent by Judge THOMAS.
The opinion filed on October 22, 1997, and reported at 126 F.3d 1235 (9th Cir.1997), is withdrawn, and the attached opinion filed in its place.
We reconsider our decision in this case which is still before us on remand from the United States Supreme Court.
In 1992, the United States District Court for the Central District of California entered summary judgment against plaintiffs-appellants ("the Epstein appellants"). In Epstein v. MCA, Inc., 50 F.3d 644 (9th Cir.1995) ("Epstein I"), we reversed the District Court, and held, among other rulings, that because it released exclusively federal claims, a Delaware state judgment was not entitled to full faith and credit. In Matsushita Electric Industrial Co., Ltd. v. Epstein, 516 U.S. 367, 116 S.Ct. 873, 134 L.Ed.2d 6 (1996) ("Matsushita"), the Supreme Court reversed our decision in Epstein I and remanded for proceedings consistent with its opinion. On remand we again held, in Epstein v. MCA, Inc., 126 F.3d 1235 (9th Cir.1997) ("Epstein II"), that the Delaware state judgment was not entitled to full faith and credit. We thereafter granted defendants-appellees' ("Matsushita") petition for rehearing, and the case was reargued. We now withdraw our previous opinion, Epstein II, and substitute this opinion for it in all respects.
In 1990, Matsushita made a tender offer for (and subsequently acquired) MCA, Inc. The tender offer precipitated two lawsuits. On September 26, 1990, a Delaware class brought claims in Delaware's Chancery Court asserting that MCA's directors breached their fiduciary duties to shareholders under Delaware law by failing to maximize shareholder value upon a change in corporate control. On December 3, 1990, while the Delaware class action was pending, the Epstein appellants filed this class action in federal district court asserting that Matsushita's tender offer violated Securities and Exchange Commission Rules 10b-3 and 14d-10 promulgated under the Securities Exchange Act of 1934 ("Exchange Act").
On April 16, 1992, after extensive proceedings, the District Court declined to certify the Epstein appellants as a class and entered summary judgment against them. See Second Amended Order, No. 90-6451 (C.D. Cal. filed April 16, 1992). On October 22, 1992, while the appeal of the District Court's decision was pending before us, the Delaware class action was settled. The order and final judgment of the Delaware Chancery Court approving the settlement explicitly provided for the release of the federal claims raised in this action. See In re MCA, Inc. Shareholders Litig., 1993 WL 43024 (Del.Ch. Feb.16, 1993). Because the Epstein appellants were members of both the state class and the proposed federal class and did not opt out of the Delaware settlement, Matsushita argued before us on appeal that the Epstein appellants' federal claims were barred by the Delaware judgment under the Full Faith and Credit Act, 28 U.S.C. § 1738.
In Epstein I, we rejected Matsushita's argument, and held that the Full Faith and Credit Act did not apply because the Delaware settlement released claims exclusively within the jurisdiction of the federal courts. Addressing the merits, we reversed the district court's entry of summary judgment and denial of class certification.1 The Supreme Court granted certiorari to decide whether this court could withhold full faith and credit from the Delaware state judgment releasing claims within the exclusive jurisdiction of the federal courts under the Exchange Act.
The Supreme Court held that we could not, concluding that the Delaware judgment was entitled to full faith and credit because (1) under Delaware law, the Epstein appellants were bound by the Delaware class settlement releasing the federal claims, and (2) the grant of exclusive federal jurisdiction in § 27 of the Exchange Act did not partially repeal the Full Faith and Credit Act. The Supreme Court therefore reversed our decision in Epstein I and remanded. See Matsushita, 516 U.S. at 387, 116 S.Ct. 873.
On remand, a divided panel in Epstein II held that despite the Court's holding in Matsushita, the Delaware judgment was not entitled to full faith and credit because it violated due process based on the inadequacy of the class representation. The panel therefore reversed and remanded for proceedings consistent with those portions of Epstein I that were not reversed by the Supreme Court.
On October 24, 1997, two days after the filing of Epstein II, Judge Norris, the author of both Epstein I and Epstein II, resigned from this court. Matsushita filed a petition for rehearing on November 5, 1997. On January 9, 1998, Judge Thomas was drawn to replace Judge Norris and the reconstituted panel granted the petition for rehearing on June 8, 1998. Following rehearing, we now withdraw our opinion in Epstein II and consider anew whether the Epstein appellants are bound by the Delaware judgment.
The Epstein appellants assert that, despite the Supreme Court's holding in Matsushita, we cannot accord full faith and credit to the Delaware judgment because it violated their due process rights to adequate representation in and judicial supervision of the Delaware proceedings. We are somewhat perplexed by this contention, because Matsushita's holding was explicitly and implicitly premised upon the validity of the Delaware judgment. The Supreme Court stated in Matsushita that the Epstein appellant's were "bound . . . by the judgment," 516 U.S. at 379, 116 S.Ct. 873, and held that the exclusively federal claims released by that judgment were not exempted from full faith and credit, see id. at 385-87, 116 S.Ct. 873. It should go without saying that we are not free to ignore the Court's determinations in Matsushita by holding that the Epstein appellants are not bound by the judgment.
In Matsushita, the Supreme Court commenced its analysis by quoting the Full Faith and Credit Act's mandate "that the judicial proceedings' of any State `shall have the same full faith and credit in every court within the United States . . . as they have by law or usage in the courts of such State . . . from which they are taken.'" 516 U.S. at 373, 116 S.Ct. 873 (quoting 28 U.S.C. § 1738). Accordingly, the first step of the Marrese analysis employed by the Court to determine whether the Delaware judgment could bar the litigation of exclusively federal claims required the Court to "look to the law of the rendering State to ascertain the effect of the judgment." Matsushita, 516 U.S. at 375, 116 S.Ct. 873 (citing Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 381-382, 105 S.Ct. 1327, 84 L.Ed.2d 274 (1985)).
Following Marrese's instructions, the Court reviewed Delaware law on the preclusive effect of settlement judgments. The Court's canvas revealed that "the Delaware Supreme Court has manifested its understanding that when the Court of Chancery approves a global release of claims, its settlement judgment should preclude on-going or future federal court litigation of any released claims." Id. at 377, 105 S.Ct. 1327. The Court further noted that under Delaware law, a state court settlement of a class action could release or preclude claims only where that settlement was "determined to be fair and to have met all due process requirements." Id. at 377-78, 105 S.Ct. 1327 (quoting In re MCA, Inc. Shareholders Litig., 598 A.2d 687, 691 (Del.Ch.1991)). The Court then concluded that "a Delaware court would afford preclusive effect to the settlement judgment in this case." Id. at 378, 116 S.Ct. 873.
The Epstein appellants make much of this conditional language, but it merely reflects that the Court had yet to satisfy itself that the proceedings in Delaware had met all the due process requirements for binding absent class members.2 Turning to these due process requirements, the Court proceeded to march through Delaware Chancery Rule 23, which is, as the Court noted, "modeled on Federal Rule of Civil Procedure 23." Id. at 371, 116 S.Ct. 873.
The Court stated that:
As required by Delaware Court of Chancery Rule 23, see Prezant v. De Angelis, 636 A.2d 915, 920 (1994), the Court of Chancery found, and the Delaware Supreme Court affirmed, that the settlement was "fair, reasonable and adequate and in the best interests of the . . . Settlement class" and that notice to the class was "in full compliance with . . . the requirements of due process." In re MCA, Inc. Shareholders Litigation, C.A. No. 11740, 1993 WL 43024 (Feb. 16, 1993) . . . . The Court of Chancery "further determined that the plaintiffs, . . . as representatives of the Settlement Class, have fairly and adequately protected the interests of the Settlement Class." In re MCA, Inc. Shareholders Litigation, supra, reprinted in App. to Pet. for Cert. 73a. Cf. Phillips Petroleum Co., supra, at 812, 105 S.Ct. at 2974 (...
To continue reading
Request your trial
-
Moreno v. UtiliQuest, LLC
...whom the earlier judgment is asserted a ‘full and fair opportunity’ to litigate the claim or issue." Id. (quoting Epstein v. MCA, Inc. , 179 F.3d 641, 648–49 (9th Cir. 1999) ). "Normally we will satisfy ourselves that the party received the requisite notice, opportunity to be heard, and ade......
-
Patrowicz v. Transamerica Homefirst, Inc.
...party against whom the earlier judgment is asserted a `full and fair opportunity' to litigate the claim or issue." Epstein v. MCA, Inc., 179 F.3d 641, 648-49 (9th Cir.1999) (emphasis added) (quoting Kremer v. Chemical Const. Corp., 456 U.S. 461, 480, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982)). ......
-
Hege v. Aegon U.S. Llc
...standard to apply appears to be an open one in this Circuit. Respectively, the leading opinions for each position are Epstein v. MCA, Inc., 179 F.3d 641 (9th Cir.1999), and Stephenson v. Dow Chemical Co., 273 F.3d 249 (2d Cir.2001). In Epstein, the Ninth Circuit held that collateral review ......
-
Hunter v. Ahearn (In re Hyundai and Kia Fuel Economy Litigation)
...as time-barred.10 But Scott does not dispute that she, like all class members, had the right to opt out. See Epstein v. MCA, Inc. , 179 F.3d 641, 648 (9th Cir. 1999) ; see also Ortiz v. Fibreboard Corp. , 527 U.S. 815, 848, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999) ("[B]efore an absent class m......
-
Money matters: judicial market interventions creating subsidies and awarding fees and costs in individual and aggregate litigation.
...199 (1992) (arguing for expansion of the law of nonparty preclusion). The requirement of adequacy is explicated in Epstein v. MCA, Inc., 179 F. 3d 641 (9th Cir. 1999), revising, 126 F. 3d 1235 (9th Cir. 1997), cert. denied sub, nom. Epstein v. Matsushita Elec. Indus. Co., 120 S. Ct. 497 (19......
-
Federal jurisdiction and due process in the era of the nationwide class action.
...I.B. (95) See 11 U.S.C. [section] 362 (2000). (96) See, e.g., Epstein v. MCA, Inc., 126 F.3d 1235, 1248-51 (9th Cir. 1997), withdrawn, 179 F.3d 641 (9th Cir. 1999) (discussing the structural danger of malfeasance in cases where class counsel appear to be using a state court proceeding as a ......
-
Separation of Powers and the Class Action
...(assuming any further prerequisites are met), regardless of which action was first brought."). 115. 273 F.3d 249 (2d Cir. 2001). 116. 179 F.3d 641 (9th Cir. 117. Id. at 648 ("Due process requires that an absent class member's right to adequate representation be protected by the adoption of ......
-
THE PATH OF ADMINISTRATIVE LAW REMEDIES.
...and remanded in part, and aff'd in part by an equally divided Court in part, 539 U.S. 111 (2003) (per curiam), with Epstein v. MCA, Inc., 179 F.3d 641 (9th Cir. (156) See, e.g., Nat. Res. Def. Council v. EPA, 643 F.3d 311, 320 (D.C. Cir. 2011) (reasoning that "the Guidance binds EPA regiona......