Questions on Matsushita
Consider first a situation not
involving a class action and not involving a settlement agreement.
Instead P sues D in state court on a state law cause of action, the
action comes to judgment and P subsequently sues D in federal court
concerning a federal cause of action for which federal courts have
exclusive federal subject matter jurisdiction. P's subsequent federal
cause of action concerns the same transaction as the earlier state
1) What are the general arguments for allowing claim preclusion here?
What are the general arguments for refusing claim preclusion? What are
the general arguments for allowing issue preclusion here? What are the
general arguments for refusing issue preclusion?
2) According to the SCt in Matsushita and Marrese, it is clear that if,
under state law, the federal
action would not be precluded (because it was not within the subject
matter jurisdiction of the state court), then the federal court may not
preclude the action. But how likely is it that there is going to be any
meaningful state law on the matter? If there isn't any meaningful state
law, what should the assumed position be? Should one assume that states
will adhere to the rule that claim preclusion does not apply to
foreclose a claim beyond the jurisdiction of the court rendering
3) Furthermore, even if one assumes that under state law the federal
action would not be precluded, why can't federal courts give greater
preclusive effect to a state court judgment than the state would? Why
is that contrary to full faith and credit?
4) According to the SCt in Matsushita and Marrese, it is clear
that if, under state law,
the federal action would be
precluded (even though it was not within
the subject matter jurisdiction of the state court), then the federal
court must preclude the action unless the federal statute giving the
federal courts exclusive federal subject matter jurisdiction for the
federal action impliedly repealed federal courts' obligations under
section 1738 to give full faith and credit to state court judgments.
How easy is it for implied repeal to be found?
Now consider Matsushita, which
involved the settlement of a
state law class action in
5) Why isn't this case really about contract law, rather than full
faith and credit? After all, isn't the real issue whether the
settlement contract covered
the federal securities law claims? Does that make questions of
exclusive federal subject matter jurisdiction irrelevant?
6) Why are there special worries about the power of the class
representatives in the state law action to release the federal
securities law claims? Consider what Wright & Miller, Federal
Practice and Procedure 4470.1 have to say on the matter:
It is clear that an individual plaintiff should be able to settle a
state-court action on terms that are intended to, and do, preclude
relitigation in any court of all claims, including those arising in
exclusive federal jurisdiction. It is equally clear that a stranger
could not release the exclusive federal jurisdiction claims—or for that
matter, any claims—of others by a private agreement made without
authorization and without litigation. Neither can a stranger simply
advance the claims of others in litigation. The only means by which the
Delaware plaintiffs could assert power to release the claims of others
was by way of a class action. Yet a Delaware state court could not
adjudicate a class claim arising under the Securities Exchange Act of
1934. How, then, can a plaintiff who lacks capacity to release the
claims of others, and a state court that lacks jurisdiction to
adjudicate the claims of others, agree to defeat the claims of others
by certifying a class action and approving its settlement?