The Curious Complications with Back-End Opt-Out Rights

Abstract

Class action litigation seeks to mediate pressing conflicts between individual autonomy and collective justice; federal supervision and local control; self-interested class counsel and the represented class. These conflicts are exacerbated when a federal court that approves a class action settlement later seeks to enjoin state court litigants from violating its terms. Yet the demand for such injunctions has increased in light of the advent of back-end opt-out rights. In recent years, class members have been afforded back-end, or delayed, opportunities to opt out of a class action once the terms of the settlement are disclosed. These back-end opt-out rights may afford only limited rights to sue outside the confines of the class action - for example, class members may be permitted to seek compensatory but not punitive damages. Does the federal court that approved the settlement have authority to enjoin back-end opt-out plaintiffs from seeking relief in state court that exceeds the limits built into the back-end opt-out right?

Three sets of curious complications may arise if the federal court seeks to enter such an injunction. First, if diversity is lacking between the opt-out plaintiff and the defendant, and the plaintiff sues on only state-law claims, the federal court may lack subject matter jurisdiction to grant an injunction. It also may lack personal jurisdiction over an opt-out plaintiff who has no contacts with the state in which the federal court sits. Second, federalism complications are likely to crop up. Both the Anti-Injunction Act and the Younger abstention doctrine limit the authority of federal courts to issue injunctions against pending state court proceedings. Finally, equitable and practical considerations may counsel against micro-management of state court litigation by a federal judge.

The objective in identifying these complications is not to question the wisdom of back-end opt-out rights, but rather to encourage their use by suggesting a variety of steps that courts and counsel can take to enforce the limits built into back-end opt-out rights without unnecessarily intruding upon the prerogatives of state court judges, exposing back-end opt-out plaintiffs to onerous litigation in fora with which they have no contact, or rendering their preserved rights meaningless. Among other recommendations, the article urges federal and state courts to collaborate in the enforcement of back-end opt-out rights.

Keywords: class actions, injunctions, anti-injunction act, abstention, younger, personal jurisdiction