Lawrence v. Household Bank (Sb), N.A.
| Decision Date | 20 August 2007 |
| Docket Number | Civil Action No. 2:03cv280-MHT. |
| Citation | 505 F.Supp.2d 1279 |
| Parties | Reather LAWRENCE, individually and on behalf of all other personal credit card holders, etc., Plaintiff, v. HOUSEHOLD BANK (SB), N.A., and Household Credit Services, Inc., Defendants. |
| Court | U.S. District Court — Middle District of Alabama |
Andrew J. Noble, III, Ronald H. Kent, Jr., Bradley Arant Rose & White LLP, Birmingham, AL, Angela Raines Rogers, Bradley Arant Rose & White, LLP, Montgomery, AL, Christopher R. Lipsett, Matthew Phineas Previn, Wilmer Cutler Pickering Hale & Dorr LLP, New York, NY, for Defendants.
Plaintiff Reather Lawrence brought this lawsuit on February 10, 2003, against defendants Household Bank (SB), N.A., and Household Credit Services, Inc. in Alabama state court, claiming violations of the federal Fair Credit Billing Act (FCBA), 15 U.S.C. §§ 1666-1666j, as enforced by the Truth in Lending Act (TILA), 15 U.S.C. § 1640.1 The defendants, hereafter collectively referred to as Household, removed this lawsuit from state to federal court pursuant to 28 U.S.C. §§ 1441 and 1446; this court's jurisdiction is properly invoked under 28 U.S.C. § 1331. Now before the court is Household's motion for summary judgment. For the reasons that follow, that motion will be granted.
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Under Rule 56, the court must view the admissible evidence in the light most favorable to the non-moving party and draw all reasonable inferences in favor of that party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d' 538 (1986).
Lawrence, who holds a credit-card account issued by Household, claims that Household violated the FCBA, 15 U.S.C. § 1666c, and its implementing regulations, 12 C.F.R. § 226.10, by not posting payments received after 1:00 p.m. to a customer's account until the following day. Lawrence filed this suit as a putative class action, but this court has not certified a class nor is there a motion for class certification pending.
On or about May 15, 2004, while Lawrence's suit was pending in this court, Lawrence received notice that James Shea and four other named plaintiffs, on behalf of themselves and others similarly situated, had filed a lawsuit in the Superior Court of Orange County, California, asserting, among other claims, that Household's practice of not crediting payments to their cardholders' accounts on the day the payments are received violates California state law. In Shea, the parties proposed a class settlement that would release Household from any claims arising out of the acts that formed the basis of the law-suit including any claims arising under federal law.
Lawrence, anticipating that the Shea settlement if approved would bar her from pursuing the instant litigation, filed a motion asking this court to enjoin Household from settling Shea in such a way as to release the class from federal claims.2 This court denied Lawrence's motion on September 13, 2004. Noting that the proposed Shea settlement included notice to all class members and an opportunity to opt out of the class, this court held that enjoining the Shea settlement would be improper in part because Lawrence was free to opt out of that lawsuit and pursue her federal claims in this case.
Lawrence; however, did not opt out of the Shea settlement. Instead, she appeared (by and through counsel) at the fairness hearing for the Shea settlement and made her objection known to the court. The California court overruled Lawrence's objection and approved the Shea settlement classwide on November 1, 2004. Lawrence appealed, but, on February 18, 2005, she filed a notice in California Superior Court that she was abandoning her appeal.
Household now moves for summary judgment in this case on grounds of res judicata. To resolve the pending motion, the court takes up three separate inquiries. First, as a threshold matter, is the Shea judgment res judicata as to Lawrence's claims in this case? Second, if res judicata applies, should Lawrence nonetheless be permitted to pursue her claims? And third, if Lawrence is barred from proceeding, should. Lawrence's counsel be permitted to conduct further discovery and come forward with a replacement plaintiff whose claims are not barred?
Res judicata, also known as claim preclusion, is an affirmative defense. "Under res judicata, a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980). Where, as here, a defendant in federal court invokes res judicata based on a prior state-court judgment, that defense is governed by the Full Faith and Credit Act, which provides 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." 28 U.S.C. § 1738.
In Matsushita Electric Industrial Co. v. Epstein, 516 U.S. 367, 116 S.Ct. 873, 134 L.Ed.2d 6 (1996), the United States Supreme Court held that the Full Faith and Credit Act should be applied to class-action settlements in state court that release the defendants from federal claims.3 Matsushita instructs that the federal court look to the law of the State in which the first judgment was entered to ascertain the effect of that judgment under state law. 516 U.S. at 375, 116 S.Ct. 873. See also Allen, 449 U.S. at 96, 101 S.Ct. 411 ().
Here, the Shea judgment was entered by a California court, so this federal court must determine whether California law would give that judgment preclusive effect. Based on this court's review of California preclusion law, several principles emerge. First, res judicata is a well-established doctrine in California law; it is recognized by courts and codified by statute. Castro v. Higaki, 31 Cal.App.4th 350, 37 Cal.Rptr.2d 84, 87 (1994); Cal.Civ.Proc. Code § 1908. Under California law, "It is established that the doctrine of res judicata precludes parties or their privies from relitigating a cause of action that has been finally determined by a court of competent jurisdiction." Gamble v. General Foods Corp., 229 Cal.App.3d 893, 280 Cal.Rptr. 457, 459 (1991). Second, California courts give class-action settlements preclusive effect as to all members of the class. Johnson v. American Airlines, 157 Cal.App.3d 427, 203 Cal.Rptr. 638, 640 (Ct.App.1984). Third, to determine whether two lawsuits contain the same "cause of action" for res-judicata purposes, California courts assess whether the two actions involve the same "primary right." Acuntilde;a v. Regents of Univ. of Cal., 56 Cal.App.4th 639, 65 Cal. Rptr.2d 388, 394 (Ct.App.1997).
Applying these principles to this case, under California law the Shea settlement would be res judicata as to Lawrence's claims. It is undisputed that Lawrence was a member of the Shea class and did not opt out; and that Household, the defendant in this case, was a defendant in Shea. Furthermore, the court finds that the Shea settlement involved the same "primary right" that Lawrence claims was violated in this case: Household's alleged duty to credit payments to cardholders' accounts on the day the payments are received.
Having determined that the Shea settlement would be res judicata under California law, the court must now determine whether to give it preclusive effect under the Full Faith and Credit Act, 28 U.S.C. § 1738. Theoretically, there are two reasons why § 1738 might not apply. First, Shea is not binding on Lawrence if class certification in that case did not comply with due process. Matsushita, 516 U.S. at 394-99, 116 S.Ct. 873 (Ginsburg, J., dissenting); Kremer v. Chemical Const. Corp., 456 U.S. 461, 482, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982). Here, the Shea court found that the due-process requirements were satisfied, and Lawrence has not challenged . that determination. Second, § 1738 would not apply if Lawrence's claims invoke a federal statute that partially repeals the Full Faith and Credit Act. Matsushita, 516 U.S. at 380, 116 S.Ct. 873. Lawrence does not argue that TILA or the FCBA have any such effect on § 1738, and the court is aware of no authority that so holds. Cf. Albano v. Norwest Financial Hawaii, Inc., 244 F.3d 1061 (9th Cir.2001) ().
Accordingly, the court concludes that the Shea settlement is res judicata as to Lawrence's claims in this lawsuit. Under the Full Faith and Credit Act, this court must give preclusive effect to the California court's judgment in Shea. Because Lawrence did not opt out of the plaintiff class in Shea, her claims cannot proceed in this court.4
Lawrence essentially concedes that, res judicata bars her claims. See Pl. Supp. Submission (doc. no. 89) at 2 (). Notwithstanding that concession, Lawrence argues that this court could "allow Ms. Lawrence to continue to maintain the action." Id. at 4. This court disagrees.
Res judicata is an affirmative defense. Although it is waivable, once asserted the court does not have discretion to ignore it. Louisville & N.R. Co. v. M/V Bayou...
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