Reppert v. Marvin Lumber and Cedar Co., Inc.

• Decision Date: 27 February 2004
• Docket Number: No. 03-2234.,03-2234.
• Citation: 359 F.3d 53
• Parties: Sibley P. REPPERT and Christine Vezetinski, Plaintiffs, Appellants, v. MARVIN LUMBER AND CEDAR CO., INC., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 53

359 F.3d 53

Sibley P. REPPERT and Christine Vezetinski, Plaintiffs, Appellants, v. MARVIN LUMBER AND CEDAR CO., INC., Defendant, Appellee.

No. 03-2234.

United States Court of Appeals, First Circuit.

Heard January 7, 2004.

Decided February 27, 2004.

Michael J. Barkoff, for appellants.

Thomas H. Boyd, with whom Charles (C.J.) Schoenwetter, Winthrop & Weinstine, P.A., Posternak Blankstein & Lund, LLP, Joseph P. Crimmins and Jennifer L. Finger, were on brief, for appellee.

Before TORRUELLA and LIPEZ, Circuit Judges, and LISI,^* District Judge.

TORRUELLA, Circuit Judge.

This is an appeal from an order and judgment granting defendant-appellee Marvin Lumber and Cedar Co., Inc.'s ("Marvin Lumber") motion to dismiss the appellants' complaint pursuant to Fed. R.Civ.P. 12(b)(6). The complaint alleges damages by reason of defective windows manufactured by Marvin Lumber, a Minnesota corporation, which were purchased by appellants, Massachusetts residents, through a supplier in Massachusetts.

In its motion, Marvin Lumber raised as a defense to the present suit the preclusive effects of a settlement and judgment entered in a class action brought in the state courts of Minnesota, entitled O'Hara v. Marvin Lumber & Cedar Co., Inc., Civil Action No. PD 00-014027 ("the O'Hara suit"). The district court agreed with Marvin Lumber, and this appeal followed. Appellants contend that the district court erred in dismissing their complaint on res judicata grounds, because they allegedly failed to receive actual notice of the O'Hara suit and because their claims were distinct from those litigated in O'Hara. It is their view that to allow preclusive effect to such a judgment violates their right to due process.

For the reasons hereinafter stated, we affirm the decision of the district court.

Between 1985 and 1988, Marvin Lumber, a national manufacturer of windows and doors, treated its products with a wood preservative known as "PILT" which it acquired from PPG Industries, Inc. This preservative was ineffective and defective, resulting in the premature deterioration of many of Marvin Lumber's windows. This situation spawned the O'Hara class action in 1999, in which the class was defined as all owners of defective windows and doors manufactured by Marvin Lumber treated with PILT during the years 1985 to 1988. Damages were sought in excess of $70 million dollars, including damages resulting from Marvin Lumber's alleged failure to warn about the defective PILT treatment. Recovery was sought based on the consumer protection statutes of all fifty states and the District of Columbia.

Eventually, the O'Hara suit was settled, with the approval of the judge presiding over said matter, in Minnesota's Fourth Judicial District, that state's trial court of general jurisdiction. Pursuant to Minnesota Rule of Civil Procedure 23, which is substantially similar to its federal counterpart, Fed.R.Civ.P. 23, a fund was established in the amount of $300,000 to pay for the costs of notifying the class members. Thereafter, direct mail notices were sent to all identifiable class members, with similar notices being published in 33 newspapers throughout the United States. The notices included a toll-free number and the address of a web-site, established to provide potential class members with information about the class action and to make available appropriate forms for their active participation in the proceedings or to allow them to opt out of the suit.

Thereafter, and before the class settlement was approved, the Minnesota court, as required by state law (in similar fashion to its federal counterpart), held a fairness hearing to determine whether the settlement was reasonable, adequate, and in the best interest of the class. At least one Massachusetts resident appeared at the hearing to challenge the settlement, on the grounds that under Massachusetts law the claims were not yet time-barred, an objection that was overruled by the court.¹ On December 4, 2001, the O'Hara court determined that the settlement was fair, adequate, and reasonable, and proceeded to approve it. The court specifically concluded that the notice provided to class members was the best notice practicable, and thus entered final judgment.

The appellants purchased windows manufactured by Marvin Lumber windows in 1988. This was done through a building contractor who acquired the windows from a local hardware store in Massachusetts. Thereafter, the windows were installed in their residences. In the autumn of 2002, it was discovered that they were suffering from wood decay problems and related damage to appellants' residence and upon inspection it was concluded that these were caused by the inadequate preservatives used in the manufacturing process.

Appellants filed the present action in the Massachusetts state courts seeking damages for negligence, failure to warn, and violation of Mass. Gen. Laws ch. 93A.² The suit was removed to the federal jurisdiction by Marvin Lumber, and as previously indicated, the district court upon motion dismissed the suit, and this appeal followed.

I. Standard of review

A dismissal pursuant to Fed.R.Civ.P. 12(b)(6) is reviewable de novo. Carreiro v. Rhodes Gill & Co., Ltd., 68 F.3d 1443, 1446 (1st Cir.1995). The facts are considered in the light most favorable to the non-moving party, who receives the benefit of all reasonable inferences. Id.

II. Class actions and the doctrines of res judicata and release

"It is beyond cavil that a suit can be barred by the earlier settlement of another suit in either of two ways: res judicata or release." Nottingham Partners v. Trans-Lux Corp., 925 F.2d 29, 31-32 (1st Cir. 1991). Although in this case the district court ruled only on res judicata grounds, appellee claims the applicability of both defenses.

Res judicata is a valid defense to a later suit if (1) there is a final judgment on the merits of an earlier action, and (2) there is identity of the parties and (3) identity of the claims in both suits. See United States v. Cunan, 156 F.3d 110, 114 (1st Cir.1998). In appropriate circumstances these rules are applicable to class actions. See Matsushita Elec. Indus. Co., Ltd. v. Epstein, 516 U.S. 367, 379, 116 S.Ct. 873, 134 L.Ed.2d 6 (1996) ("There is of course no dispute that under elementary principles of prior adjudication a judgment in a properly entertained class action is binding on class members in any subsequent litigation.") (quoting Cooper v. Fed. Reserve Bank of Richmond, 467 U.S. 867, 874, 104 S.Ct. 2794, 81 L.Ed.2d 718 (1984))(quotation marks omitted).

The first prong of this rule, whether there is extant a final judgment on the merits in the first suit, is clearly satisfied considering the final judgment of the Minnesota court in O'Hara.

The issue in the second prong, the identity of the parties, is intermingled with appellants' due process claims, wherein appellants allege that they failed to receive actual notice of the O'Hara suit and settlement, and thus are not bound by the subsequent judgment. Although it is a fundamental requirement of due process that interested parties be apprised of the pendency of actions in which they have an interest, and be afforded an opportunity to present their allegations, such requirements can be met in appropriate cases by methods of notification other than actual personal notice. Cf. Mullane v. Cent. Hanover Tr. Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950); Lombard v. United States, 356 F.3d 151, 156 (1st Cir. 2004).

"Individual notice of class proceedings is not meant to guarantee that every member entitled to individual notice receives such notice," but "it is the court's duty to ensure that the notice ordered is reasonably calculated to reach the absent class members." Hallman v. Pa. Life Ins. Co., 536 F.Supp. 745, 748-49 (N.D.Ala. 1982) (quotation marks and citation omitted); see also In re Viatron Computer Sys. Corp. Litig., 614 F.2d 11, 13 (1st Cir.1980); Key v. Gillette Co., 90 F.R.D. 606, 612 (D.Mass.1981); cf. Lombard, at 155. After such appropriate notice is given, if the absent class members fail to opt out of the class action, such members will be bound by the court's actions, including settlement and judgment, even though those individuals never actually receive notice. Cooper, 467 U.S. at 874, 104 S.Ct. 2794; 7B Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1789 (2d ed.1986).

Such is the present case, with notification by mail to all known members of the certified class, and the publication of this notice being placed in 33 newspapers of general circulation throughout the United States. The record shows that appellants did not receive mailed notification of the O'Hara proceedings because, not having purchased Marvin Lumber's products directly from that company, their names did not appear in any Marvin Lumber record. However, the notice was published in the Boston Globe, a Massachusetts newspaper of general circulation. The O'Hara court found that the notice procedures met the requirements of the applicable Minnesota Rule of Civil Procedure and comported with due process requirements.³ At a minimum, as applied to appellants, the newspaper notices met the legal requirements of due process. See Lombard, at 155.

The O'Hara court determined that the class had been adequately represented and that the settlement was fair, entering judgment approving the settlement. Appellants, having purchased Marvin Lumber windows in 1988, were merged into the O'Hara class. The second prong of the res judicata standard, identity of the parties, was thus met.

Appellants reserve their strongest arguments in support of their challenge to compliance with the third res judicata prong, the identity of the O'Hara action with the present one. Essentially, appellants argue lack of identity of causes of action in that the present suit is based on Marvin Lumber's breach of its post-sale duty to warn persons who...