A federal district court recently held that previous class action settlements do not bar subsequent suits relating to the same claims by state attorneys general. In Spinelli v. Capital One Bank, USA, 8:08-cv-132-T-33EAJ (M.D. Fla. Aug. 22, 2012), the court denied Capital One’s motion to enjoin prosecution by state attorneys general over credit card payment protection plans on the basis of a previous $250 million nationwide class action settlement approved by that court in 2010.
The 2010 settlement had explicitly released Capital One from any claims, charges or complaints by “the government in its capacity in parens patriae” and from any liability based on any violation of federal, state or local law. Capital One specifically sought an injunction enjoining the Attorneys General of Hawaii and Mississippi from prosecuting cases related to payment protection against Capital One, and the imposition of sanctions against the Golomb & Honik law firm, which had been counsel for the plaintiffs in the previous class action and had subsequently signed on as counsel for Hawaii and Mississippi. Capital One sought relief pursuant to the Anti-Injunction Act (“AIA”), which allows a federal court to grant injunctions “where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.” Capital One argued that the state AG suits would “cast doubt on the finality” of the court’s previous ruling in approving the 2010 settlement.
The court rejected these claims, finding that its previous court order approving the 2010 settlement “did not bind the States of Mississippi and Hawaii” because they were not defined as class members and did not have an opportunity to participate in the litigation or opt out of the class and it would be a violation of the Due Process to enjoin the state AGs. The court further held that the injunction “would usurp the claims of two sovereign states in violation of the Eleventh Amendment and other laws” and that “the State’s sovereign interests were neither raised, actually litigated, nor resolved in the [previous class action litigation].”
The court also noted that “a state’s sovereign interests cannot be compromised or impeded by a private settlement agreement” and that “the government is not bound by private litigation when the government’s action seeks to enforce a [ ] statute that implicates both public and private interests.”
This case serves as additional caution against relying on any class action settlement to bar claims by state or federal regulators, especially claims seeking to enforce laws implicating “public interests.” A copy of the order denying Capital One’s motion can be found here.