Antitrust Law Daily Tennessee antitrust, consumer-protection claims over restricted Canadian auto imports barred by res judicata
Friday, October 26, 2018

Tennessee antitrust, consumer-protection claims over restricted Canadian auto imports barred by res judicata

By Thomas G. Wolfe, J.D.

Plaintiffs who asserted antitrust and consumer-protection claims in a Tennessee chancery court against 18 automobile manufacturers and two automobile-dealer trade organizations for violations of the Tennessee Trade Practices Act and Tennessee Consumer Protection Act were bound by 2009 federal rulings and a subsequent judgment in favor of the auto manufacturers and trade groups, the Knoxville, Tennessee Court of Appeals has decided. The plaintiffs in the proposed class action had contended that the defendants conspired to restrict the exportation of nearly-new Canadian vehicles into Tennessee and the rest of the United States. In upholding the state chancery court’s res judicata ruling that the state plaintiffs advanced the same Tennessee antitrust and consumer-protection claims as the federal plaintiffs did in separate Multidistrict Litigation (MDL), the appellate court determined that although the state plaintiffs were not parties in the federal MDL action, the state plaintiffs: had notice of the MDL litigation; "were in privity" with the federal plaintiffs; had a "full and fair opportunity" to litigate their claims in the MDL action; and were "adequately represented" in, and "exercised control" over, that prior litigation through one of the same law firms. Further, based on these res judicata principles, the state chancery court correctly entered judgment in favor of all the defendants remaining in the state case, the Tennessee appellate court ruled (Johnson v. General Motors Corp., October 24, 2018, McClarty, J.).

Notably, in rendering its decision, the court stated that several other state courts—in Arizona, California, Minnesota, New Mexico, and Wisconsin—have reached similar conclusions when called to address issues of res judicata and claim preclusion stemming from the MDL.

Complaint. In their complaint, the state Tennessee plaintiffs alleged that the automobile manufacturers and dealer trade associations had conspired to restrict the export of nearly-new Canadian vehicles into the United States in violation of the Tennessee Trade Practices Act and Tennessee Consumer Protection Act. Meanwhile, in 2009 in the federal MDL action, the trial court reviewed pertinent state law in 19 states, including Tennessee, and determined that each state required "evidence of injury" and determined that "this was not proven."

Cohen Milstein firm. According to the court’s opinion, the state plaintiffs’ complaint in Tennessee was filed by three law firms, including the firm of Cohen, Milstein, Hausfeld & Toll (Cohen Milstein), a national plaintiffs’ firm that filed similar complaints in a number of other state courts as well, "teaming with local counsel in those jurisdictions just as they did in Tennessee." Lawyers from Cohen Milstein were significantly involved in the MDL action, and the firm acknowledged that it "appeared in the federal case on behalf of the state plaintiffs, including Tennessee."

Moreover, counsel representing both federal and state plaintiffs agreed to formalize a cooperative representation of the state and federal plaintiffs, and formed a "Coordinated Action Counsel" committee. The Cohen Milstein firm was involved in many facets of the litigation, including settlement negotiations.

State chancery court. Against this backdrop, the lower Tennessee chancery court not only granted defendant Ford Motor Company’s request for judgment based on res judicata principles, but also ruled that the judgment "applied equally to all remaining defendants in the action" in favor of FCA Canada, Inc. (formerly known as DaimlerChrysler of Canada, Inc.) and Mercedes Benz Canada, Inc. The court emphasized that the Tennessee state plaintiffs were "in privity with" the federal plaintiffs, largely because the Tennessee laws at issue were the same; the federal court took care to protect the interests of non-party state plaintiffs; and the Cohen Milstein firm’s representation and participation in the MDL cemented that privity.

Tennessee appellate court’s decision. On appeal, the Tennessee Court of Appeals outlined the scope and nature of res judicata principles, stating that "res judicata bars a second suit between the same parties or their privies on the same cause of action with respect to all issues which were or could have been litigated in the former suit." Applying this rule, the court agreed with the chancery court that the state Tennessee plaintiffs "advanced the same Tennessee antitrust and consumer protection claims as the federal Tennessee plaintiffs, based on the same evidence and theory of harm," and were bound by the earlier federal judgment as a result.

In arriving at that conclusion, the appellate court emphasized that: (i) the state Tennessee plaintiffs had a full and fair opportunity to litigate the matter in the MDL action; (ii) five other state courts that ruled on the same issue decided that the state plaintiffs in the "companion state actions" were "bound by the federal summary judgment decision"; and (iii) in keeping with U.S. Supreme Court precedent, the state Tennessee plaintiffs were "adequately represented" in the prior litigation and/or "exercised control" over that prior litigation, especially in light of the Cohen Milstein firm’s role and representation in the MDL action.

In addition, the appellate court held that the chancery court acted properly when it entered judgment for "all remaining defendants against whom identical claims were asserted because res judicata precludes the appellants from asserting those claims in their entirety." In other words, the court explained, res judicata is a claim preclusion doctrine that "bars the re-litigation of entire claims—not individual defendants." Accordingly, the court affirmed the judgment of the trial court in favor of the defendants and remanded the matter for any further proceedings.

The case is No. E2017-01642-COA-R3-CV.

Attorneys: Thomas C. Jessee (Jessee & Jessee) for Destine Johnson. Kent Erickson Herrin (Herrin, Booze & McPeak) for Ford Motor Co., Ford Motor Co. of Canada, Ltd., Daimler Chrysler Canada, Inc. and Mercedes-Benz Canada, Inc.

Companies: Cohen, Milstein, Hausfeld & Toll; Daimler Chrysler Canada, Inc.; Ford Motor Co.; Ford Motor Co. of Canada, Ltd.; General Motors Corp.; Mercedes-Benz Canada, Inc.

MainStory: TopStory Antitrust ConsumerProtection StateUnfairTradePractices TennesseeNews

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