Distribution, Competition, and Antitrust / IP Law

Archives for January 2015

Can the State Seek Restitution After a Class Action Settlement?

In The People of the State of California v. IntelliGender, LLC, 771 F.3d 1169 (9th Cir. Nov. 7, 2014) (Wardlaw, J.), the Ninth Circuit said the answer is “no.”  A federal court had approved a class action settlement involving false advertising and unfair competition claims that, among other things, awarded $10 per approved claim.  Subsequently, the California Attorney General’s Office San Diego City Attorney(*) brought its own Section 17200 suit challenging the same practices and seeking civil penalties and injunctive relief as well as restitution under its parens patriae authority.

The Ninth Circuit held that the State could maintain its action for penalties and injunctive relief.  However, its claim for restitution was barred under the doctrine of res judicata, because as to the sought-after restitution, the State stood in privity with the settlement class members.  Res judicata barred the claim for restitution even though the State did not participate in the private class action.

The decision will help simplify the settlement calculus for defendants sued in class actions who otherwise would remain exposed to subsequent similar monetary claims brought by a state enforcer under its parens patriae authority.

(*) The Court repeatedly references the State, but in actuality the suit was brought by San Diego.  Apologies for the confusion — and thanks to a reader in government who noticed.

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