Williams v. General Elec. Capital Auto Lease, Inc.

• Decision Date: 27 November 1998
• Docket Number: No. 97-1321,97-1321
• Citation: 159 F.3d 266
• Parties: Stacey A. WILLIAMS, et al., on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. GENERAL ELECTRIC CAPITAL AUTO LEASE, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 266

159 F.3d 266

41 Fed.R.Serv.3d 1601

Stacey A. WILLIAMS, et al., on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. GENERAL ELECTRIC CAPITAL AUTO LEASE, INC., et al Defendants-Appellees.

No. 97-1321.

United States Court of Appeals Seventh Circuit.

Argued Nov. 5, 1997.

Decided Oct. 2, 1998.

Rehearing and Suggestion for Rehearing En Banc Denied Nov. 27, 1998.

O. Randolph Bragg, Horwitz, Horwitz & Associates, Daniel A. Edelman, Cathleen M. Combs, Michelle A. Weinberg, Tara L. Goodwin, James O. Latturner, Edelman & Combs, J. Eric VanderArend, Gessler, Hughes & Socol, Chicago, IL, for Plaintiffs.

David B. Johnson (argued), Theodore R. Scarborough, Jr., Robert E. Easton, Sidley & Austin, George A. Platz, Jordan R. Schau, Lovell, White & Durrant, Chicago, IL, for Defendant-Appellee.

Alexander T. Moore, Chicago, IL, Lewis S. Sandler, Kaufman, Malchman & Kirby, New York, NY, Edward T. Joyce (argued), Arthur W. Aufmann, Joyce & Associates, Chicago, IL, Leslie Blackner, Jacksonville, FL, for Appellants.

Before BAUER, RIPPLE, and DIANE P. WOOD, Circuit Judges.

DIANE P. WOOD, Circuit Judge.

Because class actions are brought in the names of only a few representative plaintiffs on behalf of a larger defined group, it happens from time to time that duplicate or overlapping class actions are filed. When this occurs, it normally is necessary to decide which lawsuit (if any) definitively resolves a matter between particular parties. That is the principal issue before us in this case, a class action challenging certain provisions in automobile leases issued by General Electric Capital Auto Lease, Inc. (GECAL) under the Consumer Leasing Act (CLA), 15 U.S.C. § 1667 et seq. and various Illinois statutes prohibiting unfair and deceptive trade practices. After this case was filed in the Northern District of Illinois in December 1994 at the behest of named representatives Stacey A. Williams and others, the named parties to the lawsuit consented to proceeding before a magistrate judge under 28 U.S.C. § 636(c). The court eventually certified a nationwide class, and the case was resolved when the district court approved a settlement ("the Williams suit"). Later, Gwynne Dooner and others filed essentially the same suit as a new class action against GECAL in the Middle District of Florida ("the Dooner suit"). GECAL responded (among other ways) by filing a motion in the Northern District of Illinois to enjoin further prosecution of the Dooner suit. Still acting for the district court, the magistrate judge (who has since been appointed to the United States Bankruptcy Court) granted the injunction. The Dooner plaintiffs have appealed from that order. Before we discuss either the facts or the law relevant to that appeal, however, we must discuss two issues related to our appellate jurisdiction. Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, ----, 118 S.Ct. 1003, 1012, 140 L.Ed.2d 210 (1998).

I

We first explore the question whether the fact that this case was adjudicated by a magistrate judge, acting pursuant to the consent of the named class representatives, has any effect on the binding effect of the judgment on unnamed class members. Article III, § 1 of the Constitution creates a personal right in litigants to have their cases heard before an adjudicator whose independence and impartiality is guaranteed by virtue of being cloaked with certain constitutional protections. See Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833, 847-49, 106 S.Ct. 3245, 92 L.Ed.2d 675 (1986); Brook, Weiner, Sered, Kreger & Weinberg v. Coreq, Inc., 53 F.3d 851, 852 (7th Cir.1995). Although magistrate judges do not enjoy the structural Article III protections of lifetime tenure or a constitutional guarantee against salary reductions, cf. 28 U.S.C. § 631, they are nevertheless permitted to decide civil cases. Coreq, Inc., 53 F.3d at 852; 28 U.S.C. § 636(c)(1). The unanimous and voluntary consent of the parties is the constitutional "linchpin" of this power. Adams v. Heckler, 794 F.2d 303, 307 (7th Cir.1986). This means that parties added to a case after the original litigants have filed a consent under § 636(c) must also agree to the submission of the case to the magistrate judge; if they do not, then the case must be returned to a district judge. Coreq., Inc., 53 F.3d at 852. See, e.g., Mark I, Inc. v. Gruber, 38 F.3d 369 (7th Cir.1994) (new defendants added); Jaliwala v. United States, 945 F.2d 221, 223-24 (7th Cir.1991) (intervenor).

If, therefore, unnamed members of a class stood in the same position as new "parties" to the suit, it would be clear that they could not be bound by a magistrate judge's adjudication unless they expressly consented to the magistrate judge's exercise of authority. From a practical standpoint, such a rule would virtually eliminate § 636(c) referrals to magistrate judges in all potential class actions, because it would de facto transform all such cases into "opt-in" style actions and fundamentally change the capacity of the judgment (whether the result of full-blown litigation or settlement) to bind both sides in the absence of express consents. This radical result would follow, however, only if unnamed members of a class are properly considered as additional "parties" to the suit. If, instead, they are more accurately regarded as having something less than full party status, the need for their express consent also changes. This is because, not surprisingly, the lack of consent of someone who is not a party to an action does not deprive the magistrate judge of jurisdiction. See, e.g., United States v. Real Property, 135 F.3d 1312, 1317 (9th Cir.1998) (record owner of real property that was subject of in rem forfeiture proceeding); Neals v. Norwood, 59 F.3d 530, 532 (5th Cir.1995) (unserved defendant); EEOC v. West Louisiana Health Svcs., Inc., 959 F.2d 1277, 1279-80 (5th Cir.1992) (consolidated suit against single defendant where one plaintiff did not consent but consolidated cases still retained individual identities); Giove v. Stanko, 882 F.2d 1316, 1318 (8th Cir.1989) (non-intervening judgment debtor who was not automatically a necessary party to a garnishment proceeding). See also 28 U.S.C. § 636(c) (requiring "consent of the parties") (emphasis added).

Generally speaking, absent class members are not "parties" before the court in the sense of being able to direct the litigation. See, e.g., In re Brand Name Prescription Drugs Antitrust Litig., 115 F.3d 456, 458 (7th Cir.1997) (no right to appeal absent intervention); Kamilewicz v. Bank of Boston Corp., 100 F.3d 1348, 1351-52 (7th Cir.1996) (Easterbrook, J.) (dissent from denial of rehearing en banc). See generally 3 Herbert Newberg & Albert Conte, Newberg on Class Actions § 16.01 (3d ed.1992) (listing situations in which courts have treated absent class members as "parties" and "non-parties"). Instead, the named representative--in this case Stacey Williams--is the "party" to the lawsuit who acts on behalf of the entire class, including with regard to the decision to proceed before a magistrate judge. This is an inherent part of representational litigation. See generally Diane P. Wood, "Adjudicatory Jurisdiction and Class Actions," 62 Indiana L.J. 597 (1987). An unnamed class member who prefers an Article III forum has two options. First, she may apply to the district court to intervene under Rule 24(a), become a party to the lawsuit, and then exercise her right to withhold her consent to proceed before the magistrate. Or, after the entry of final judgment, the unnamed class member can raise a collateral attack based on due process against the named representative's decision to consent under § 636(c). In both cases, the key question is the same: Is (or was) the decision to consent made by a party who adequately represents (or represented) the absentee's interests? (We assume for present purposes that both these options can be exercised before the magistrate judge, if the case is otherwise properly before her. It may also be open to the unnamed class members to present such an argument directly to an Article III judge of the district court; because the record does not indicate that the plaintiffs made any effort to do so here, we offer no definitive view on the matter.) If in the first kind of case the district court concludes that the named representative is not an adequate representative (and that the other requirements of Rule 24 have been met), it should grant the application to intervene. See Fed. R. Civ. P. 24(a). Cf. United States v. City of Milwaukee, 144 F.3d 524, 528 (7th Cir.1998). Alternatively, the unnamed class member could try to show in a collateral attack that the decision to proceed before a magistrate judge was a matter on which there was a potential (or, in the light of the fully developed record, an actual) significant intra-class conflict and that the notice the absentee received was inadequate to inform her of this conflict. Cf. Hansberry v. Lee, 311 U.S. 32, 61 S.Ct. 115, 85 L.Ed. 22 (1940); Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985). See also Pacemaker Diagnostic Clinic of America v. Instromedix, Inc., 725 F.2d 537, 545 (9th Cir.1984) (en banc) (Kennedy, J.) (one reason district court should consider voiding a reference to a magistrate sua sponte is where "rights of numerous parties not present before the court might be affected by the decision"). In this case, the "Notice of Pendency of Class Action, and Notice of Proposed Settlement and Hearing Thereon" that went to the unnamed Williams class members clearly indicated that the lawsuit was before "Magistrate Judge Joan H. Lefkow." Due process requires no more. More broadly, we see nothing here that presents an Article III problem with the jurisdiction of the district court to enter the injunction from which the appeal has been taken.

One final jurisdictional quirk remains to be...