Opinion
Civil Action No. 7:99-CV-230-R
January 16, 2001
MEMORANDUM OPINION AND ORDER
Before this Court is Defendant General Motors' ("GM") Motion to Strike Class Action Allegations. For the reasons stated below, the Motion is DENIED.
I. Factual Background
In May 1998, Ryder Scott Oil ("Ryder") filed a class action complaint against GM in Texas state Court. Based on diversity jurisdiction, GM removed the action to federal court.
The case number assigned to this first federal suit was 7:98-cv-115-X.
Upon arriving in federal court, Ryder had ninety days to move for class certification. Unfortunately for Ryder, it failed to make such a motion within the given time period. After 119 days had passed, Ryder moved for an extension of time for filing its motion for class certification. Ryder ultimately made its motion to certify the class on January 15, 1999, more than 200 days after the case had been removed to federal court.
On April 9, 1999, Judge Kendall denied Ryder's motion for an extension of time as unjustifiably untimely. He accordingly struck Ryder's motion for class certification from the record. Since the class could not be certified in federal court, the amount in controversy no longer satisfied diversity jurisdiction and Judge Kendall remanded the case to state court.
Back in state court, Plaintiff Harold Carter ("Carter") was added to the suit and the court permitted Ryder and Carter to file a Second Amended Complaint, which substituted Carter as the class representative, making Ryder an individual plaintiff. With the addition of Carter as class representative, the amount in controversy again exceeded $75,000 and GM chose to remove the case to federal court again. Thus, the case is now before this Court under the current civil action number. Since arriving in federal court, Ryder, by virtue of the Third Amended Complaint has dropped out of the suit altogether, leaving Carter as the sole plaintiff.
GM now moves to strike the class action allegations contained in the Third Amended Complaint as precluded by Judge Kendall's earlier ruling in this case.
II. Analysis
GM argues that Judge Kendall's ruling in the earlier case has a preclusive effect. That is, no class may ever be certified in this case because of Judge Kendall's decision to deny Ryder an extension of time under which it could move to certify the class.
However, the Fifth Circuit has explicitly held that an "order denying class certification is not a final judgment, and therefore . . . lacks sufficient finality to be entitled to preclusive effect while the underlying litigation remains pending." J.R. Clearwater Inc. v. Ashland Chemical Co., 93 F.3d 176, 179 (5th Cir. 1996).
In J.R. Clearwater a class of plaintiff's represented by Joseph Lawshe ("Lawshe class") brought a class action suit in state court and the defendant, Ashland, removed the case to federal court. After two years of discovery, the court denied the Lawshe class' motion to certify the class. The court also denied the Lawshe class' request that the suit be dismissed without prejudice, and the suit continued on its course in federal court.
At this juncture, the Lawshe class' attorney filed a separate action in state court with a new lead plaintiff, Jack Sims ("Sims class"). When the Sims class moved for class certification, Ashland moved the district court to enjoin the state court from certifying the Sims class, as class certification was precluded by the district court's earlier order with regard to the Lawshe class. The court denied this motion because it would not have been appropriate for the federal court to enjoin the state court's action unless it was "necessary to protect or effectuate the [federal] court's judgment." 93 F.3d at 179. As such, it would be proper to enjoin the state court only where its actions might interfere with the final judgment of the federal court. Because "class certification was not a final appealable order entitled to collateral estoppel effect," there was no final judgment to protect, and thus an injunction was not appropriate. Id. at 178.
The order in the present case is merely a denial of an extension of time within which to tile a motion for class certification. If underJ.R. Clearwater, a ruling on class certification, is not a final judgment entitled to preclusive effect, an order denying an extension of time to make such a motion is certainly not a final judgment. Thus, this Court will not preclude Carter from making a motion to certify the class in the present action on the basis of Judge Kendall's prior denial of Ryder's motion for an extension of time.
GM argues that J.R. Clearwater is distinguishable from the present case because it dealt with two different suits and the federal court's desire to avoid interfering with an independent State action. However, the Court likens the present case to the one in J.R. Clearwater, because it is like two separate Suits. That is, this case involves a unique set of circumstances in which the same case has been removed twice to federal court. The first time, the plaintiff failed to timely move for class certification and was denied a motion for an extension of time in which to do so. The case was thus remanded to state court. At the state court level, the case carried on for a period of time until a new set of circumstances, a properly added plaintiff, resulted in a second removal of the case to federal court. Upon the second removal, which the Court notes GM effectuated entirely of its own free choice, the case was assigned a new case number and the whole process began again, including a new opportunity to make motions to dismiss and to certify the class. When GM chose to remove this case a second time, it effectively gave the Plaintiffs a "second bite at the apple." GM cannot use the process of removal to back Carter into a corner where the suit may not proceed at the state level as a class action, because GM insists on removing it, and it cannot proceed at the federal level because of an order denying an extension of time during a previous permutation of the case.
GM further argues that allowing Carter to carry on as the class representative in a federal class action suit after Ryder was effectively denied this right would result in utter chaos in class action suits. GM predicts that if this Court allows Carter to go forward with a motion to certify the class then "[a]ny time plaintiffs counsel was dissatisfied with a ruling . . ., plaintiff's counsel could simply dump the old class representative, . . . and start over" with a new one. However, the Court fails to see how this result could occur.
In most cases, there is not the same unique set of circumstances in which a case has been removed, then remanded, then removed again. It would be only in this very unique situation that a plaintiff could potentially do what GM suggests. In the typical suit, replacing the class representative will have no effect on the suit. The Court's reasoning in this case will only apply where a procedural ruling results in remand of an action to state court, and subsequent circumstances create a situation in which the case can be removed again to federal court. A defendant who is not happy with this possibility has a choice — he may remain in state court or he may choose to remove to federal court again.
Because Judge Kendall's order denying Ryder an extension of time was not a final judgment, it is not entitled to preclusive effect. Further, the effect of Judge Kendall's order was solely to deny Ryder an extension of time under which it could file a motion for class certification at that time. When the case was remanded and then removed again to this Court by GM, the Plaintiffs gained a second opportunity to timely file a motion for class certification. As such, the class action allegations contained in the Third Amended Complaint are appropriate and will not be stricken.
III. Conclusion
For the foregoing reasons, GM's Motion to Stike Class Action Allegations is DENIED.
It is so ORDERED.