Kardonick v. JP Morgan Chase & Co. et al

Filing 458

RESPONSE in Opposition re 456 Defendant's MOTION for Order to Show Cause and Supporting Memorandum of Law (Response by Non-Party) filed by Baron & Budd, P.C.. (Maderal, Francisco)

UNITED STATED DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
DAVID KARDONICK, JOHN DAVID,
And MICHAEL CLEMINS, individually
and on behalf of all others similarly
Situated and the general public,
Plaintiffs,
v.
JP MORGAN CHASE & CO., and
CHASE BANK USA, N.A.,
Defendants.

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No. 1:10-cv-23235-WMH

ORAL ARGUMENT REQUESTED

NON-PARTY RESPONDENT BARON & BUDD, P.C.’S
RESPONSE IN OPPOSITION TO CHASE’S
MOTION FOR SHOW CAUSE ORDER

Lewis S. Mike Eidson, Esq.
(Florida ID 151088)
COLSON HICKS EIDSON
255 Alhambra Circle, Penthouse
Coral Gables, Florida, 33134
Tel: [phone]
Fax: [phone]
[e-mail]

Russell W. Budd, Esq.
Laura J. Baughman, Esq.
J. Burton LeBlanc, IV, Esq.
S. Ann Saucer, Esq.
BARON & BUDD, P.C.
3102 Oak Lawn Avenue, Suite 1100
Dallas, Texas 75219
Tel: [phone]
Fax: [phone]
[e-mail]
[e-mail]
[e-mail]
[e-mail]

TABLE OF CONTENTS
I.

INTRODUCTION & SUMMARY......................................................................................1

II.

BACKGROUND .................................................................................................................3
A.
B.

III.

The Kardonick Settlement .......................................................................................3
The Enforcement Actions ........................................................................................4

ARGUMENTS AND AUTHORITIES................................................................................5
A.

Baron & Budd is a Complete Stranger to These Proceedings—Therefore,
Enforcing the Injunction Against Baron & Budd Would Violate the Firm’s
Right to Due Process ................................................................................................5

B.

Chase Fails To Prove That The Injunction Was Violated .......................................7
1.
2.

The States Attorneys General are Neither Representing the Claims
of, Nor “In Privity” With, the Settlement Class Members ..........................8

3.

Chase Has Already Litigated And Lost the Question of Whether
The West Virginia Attorney General is Representing or “In
Privity” With Absent Class Members ..........................................................8

4.

The States’ Claims Are Statutorily Distinct from the Absent Class
Members’ Claims. ......................................................................................10

5.

C.

Chase Cannot Prove That Baron & Budd is Representing Any
“Released Claims” In Violation of the Injunction .......................................7

All of the States’ Enforcement Action Claims are Sovereign—
None of the States’ Claims Was Brought in their Representative
Capacity .....................................................................................................11

Baron & Budd is the States’ Agent for the Enforcement Actions—
Therefore, Chase’s Attempt to Avoid the States’ Eleventh Amendment
and Due Process Defenses Fails ............................................................................13
1.

2.

i

Because the Injunction is Invalid as Applied to the States Under
the Eleventh Amendment or Due Process Clause, Baron & Budd
Cannot be Sanctioned for Representing Claims in Violation of an
Invalid Injunction .......................................................................................13
The Injunction is Invalid Under the Eleventh Amendment’s Broad
Grant of Sovereign Immunity to Equitable Actions ..................................14

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

3.
D.
IV.

Applying the Injunction to the States or their Agents Would
Violate the States’ Due Process Rights ......................................................15

The All Writs Act Does Not Apply Here—There Is Nothing Being
“Relitigated” ..........................................................................................................17

CONCLUSION ..................................................................................................................19

ii

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

TABLE OF AUTHORITIES
Page(s)
CASES
Barger v. City of Cartersville,
348 F.3d 1289 (11th Cir. 2003) ...............................................................................................14
Baybrook Homes v. Banyan Constr. & Dev.,
991 F. Supp. 1440 (M.D. Fla. 1997) ..........................................................................................6
Blaylock v. Guarini,
2011 U.S. Dist. LEXIS 47323 (E.D. Pa., May 2, 2011) ............................................................6
Bona Fide Demolition & Recovery, LLC v. Crosby Constr. Co. of La., Inc.,
2010 U.S. Dist. LEXIS 52236 (E.D. La. May 13, 2010) ...........................................................6
Buffalo Laborer Sec. Fund v. J.P. Jeanneret Assocs. (In re Beacon Assocs. Litig.),
09 Civ. 8362, 2012 U.S. Dist. LEXIS 63549 (S.D.N.Y. May 3, 2012) ...................................12
Commodity Futures Trading Comm’n v. Commercial Hedge Serv., Inc.,
422 F. Supp. 2d 1057 (D. Neb. 2006) ......................................................................................12
E.E.O.C. v. Waffle House, Inc.,
534 U.S. 279 (2002) .......................................................................................................6, 12, 16
Estate of Brennan v. Church of Scientology Flag Serv. Org.,
645 F.3d 1267 (11th Cir. 2011) ...............................................................................................17
Ex parte Young,
209 U.S. 123 (1908) .................................................................................................................15
Georgia v. Tennessee Copper Co.,
206 U.S. 230 (1907) .................................................................................................................11
Herman v. South Carolina Nat’l Bank,
140 F.3d 1413 (11th Cir. 1998) ...............................................................................................11
Hernandez v. SmithKline Beecham Pharm.,
No. 02-2750, 2006 U.S. Dist. LEXIS 72846 (D.P.R. June 6, 2006) .......................................18
Hinds County, Mississippi v. Wachovia Bank N.A.,
790 F. Supp. 2d 125 (S.D.N.Y. 2011)......................................................................................18
Horne v. Flores,
557 U.S. 433 (2009) .................................................................................................................14
In re Baldwin-United Corp.,
770 F.2d 328 (2d Cir. 1985).....................................................................................................18
iii

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

In re Diet Drugs Prods. Liab. Litig.,
369 F.3d 293 (3d Cir. 2004).................................................................................................6, 16
In re Rationis Enter., Inc. of Panama,
261 F.3d 264 (2d Cir. 2001).....................................................................................................15
Kokkonen v. Guardian Life Ins. Co. of Am.,
511 U.S. 375 (1994) .................................................................................................................17
La. ex rel. Caldwell v. Allstate Ins. Co.,
536 F.3d 418 (5th Cir. 2008) ...................................................................................................11
Link v. Wabash R.R. Co.,
370 U.S. 626 (1962) ...........................................................................................................14, 17
Lord Abbett Mun. Income Fund, Inc. v. Tyson,
671 F.3d 1203 (11th Cir. 2012) ...............................................................................................15
Massachusetts State Grange v. Benton,
272 U.S. 525 (1926) .................................................................................................................15
Mayes v. Leipziger,
674 F.2d 178 (2d Cir. 1982).......................................................................................................6
McDonald v. Redstone Fed. Credit Union,
374 Fed. App’x. 937 (11th Cir. 2010) .......................................................................................5
Nevada v. Bank of Am. Corp.,
672 F.3d 661 (9th Cir. 2012) ...................................................................................................11
New York v. General Motors Corp.,
547 F. Supp. 703 (S.D.N.Y. 1982) ..........................................................................................13
Ortiz v. Fibreboard Corp.,
527 U.S. 815 (1999) .............................................................................................................5, 16
Pennington Seed, Inc. v. Produce Exch. No. 299,
457 F.3d 1334 (Fed. Cir. 2006)................................................................................................15
Pennsylvania v. West Virginia,
262 U.S. 553 (1923) .................................................................................................................11
Phillips Petroleum Co. v. Shutts,
472 U.S. 797 (1985) ...................................................................................................................9
Pruitt v. W. Va. Dep't of Pub. Safety,
222 W. Va. 290, 664 S.E.2d 175 (2008) ....................................................................................7

iv

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

Ret. Sys. of Alabama v. J.P. Morgan Chase & Co.,
386 F.3d 419 (2d Cir. 2004).....................................................................................................18
Riccard v. Prudential Ins. Co.,
307 F.3d 1277 (11th Cir. 2002) .................................................................................................5
Rine v. Imagitas, Inc.,
590 F.3d 1215 (11th Cir. 2009) .................................................................................................7
Rio v. Credit Answers, LLC,
No. 10cv346, 2010 U.S. Dist. LEXIS 31826 (S.D. Cal. Apr. 1, 2010) ...................................18
Sandpiper Vill. Condo. Ass’n v. Louisiana-Pacific Corp.,
428 F.3d 831 (9th Cir. 2005), cert. denied, 548 U.S. 905 (2006) ................................17, 18, 19
Sawtelle v. Farrell,
70 F.3d 1381 (1st Cir. 1995) ......................................................................................................6
Secretary of Labor v. Fitzsimmons,
805 F.2d 682 (7th Cir. 1986) ...................................................................................................12
Shingle Springs Band of Miwok Indians v. Sharp Image Gaming, Inc.,
No. 2:10-cv-01396, 2010 U.S. Dist. LEXIS 109908 (E.D. Cal. Oct. 15, 2010)......................18
Smith v. Bayer Corp.,
131 S. Ct. 2368 (2011) .............................................................................................................17
Sohal v. Fed. Home Loan Mortg. Corp.,
No. C 11-01941, 2011 U.S. Dist. LEXIS 53278 (N.D. Cal. May 18, 2011) ...........................18
Spinelli v. Capital One Bank, USA,
No. 8:08-cv-132, 2012 U.S. Dist. LEXIS 118667 (M.D. Fla. Aug. 21, 2012) ........9, 10, 16, 18
State v. French,
77 Haw. 222 (Haw. Ct. App. 1994) ...........................................................................................7
Tradigrain, Inc. v. Mississippi State Port Authority,
701 F.2d 1131 (5th Cir. 1983) .................................................................................................11
United States v. Katz,
No. 10 Civ. 3335, 2011 U.S. Dist. LEXIS 59159 (S.D.N.Y. June 2, 2011) ............................12
Va. Office for Prot. & Advocacy v. Stewart,
131 S. Ct. 1632 (2011) .............................................................................................................14
Weitzman v. Stein,
897 F.2d 653 (2d Cir. 1990).....................................................................................................15

v

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

West Virginia ex rel. McGraw v. CVS Pharmacy, Inc.,
646 F.3d 169 (4th Cir.), cert. denied, 132 S. Ct. 761 (2011) ...............................................9, 11
West Virginia ex rel. McGraw v. JPMorgan Chase & Co.,
842 F. Supp. 2d 984 (S.D. W. Va. 2012) ...............................................................................4, 9
West Virginia v. Morgan Stanley & Co.,
747 F. Supp. 332 (S.D. W. Va. 1990) ......................................................................................11
Younger v. Harris,
401 U.S. 37 (1971) ...................................................................................................................15
STATUTES
28 U.S.C. § 1715(f) ........................................................................................................................16
1 Del. C. § 302(15) ..........................................................................................................................8
Hawaii Rev. Stat. § 480-1 ................................................................................................................7
Hawaii Rev. Stat. § 480-3.1 ...........................................................................................................10
Hawaii Rev. Stat. § 661-10 ............................................................................................................10
Hawaii Rev. Stat. § 480-13 ............................................................................................................10
Hawaii Rev. Stat. § 480-14(b) .......................................................................................................10
Hawaii Rev. Stat. § 480-15 ............................................................................................................10
Miss. Code Ann. § 75-24-9 ............................................................................................................10
Miss. Code Ann. § 75-24-11 ..........................................................................................................10
Miss. Code Ann. § 75-24-15(1) .....................................................................................................10
Miss. Code Ann. § 75-24-15(4) .....................................................................................................10
Miss. Code Ann. § 75-24-19 ..........................................................................................................10
Miss. Code Ann. § 75-24-23 ..........................................................................................................10
W. Va. Code § 46A-1-102(31) ........................................................................................................7
W.Va. Code Ann. § 46A-6-106(a) .................................................................................................10
W.Va. Code Ann. § 46A-7-108 .....................................................................................................10
W.Va. Code Ann. § 46A-7-109 .....................................................................................................10

vi

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

W.Va. Code Ann. § 46A-7-111(1)–(2) ..........................................................................................10
OTHER AUTHORITIES
U.S. CONST. amend. XI..................................................................................................2, 13, 14, 17
Fed. R. Civ. P. 23(a)(4) ..............................................................................................................5, 16
18 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice &
Procedure § 4405 (2d ed. 2010) ...............................................................................................17
Black’s Law Dictionary 1143 (6th ed. 1990)...................................................................................7

vii

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

I.

INTRODUCTION & SUMMARY
Non-Party Respondent, the law firm of Baron & Budd, P.C., without submitting to

jurisdiction or waiving sovereign immunity as the legal representative of the states of West
Virginia, Mississippi, and Hawaii (the “States”), respectfully submits this Response in
Opposition to Chase’s Motion for Show Cause Order [Docket No. 456] (the “Motion”).
This matter arises out of an injunction issued by this Court at the conclusion of
Kardonick v. JP Morgan Chase & Co., No. 1:10-cv-23235 (“Kardonick”), precluding the
parties—injured consumers of Chase’s credit cards—from bringing future claims over the same
facts. Currently pending are three enforcement actions by the Attorneys General of the States of
West Virginia, Mississippi, and Hawaii against Chase for injunctive relief, civil penalties and
ancillary relief. 1 Rather than moving to dismiss these actions on res judicata grounds or
“satisfaction and release,” or seeking to enforce the injunction in the courts where the actions are
pending, Chase asks this Court to sanction one of the States’ law firms that was never before this
Court as a party or as legal counsel in Kardonick, for bringing claims that were never brought
nor settled—nor could they have been—on behalf of sovereign parties to whom Chase concedes
the Court’s injunction does not apply.
There are several reasons to reject Chase’s position:
First, Chase has not established that this Court has, or ever had, personal jurisdiction
over Baron & Budd. Chase admits that the firm was not, and did not represent, a party in
Kardonick, did not sign the settlement agreement, and never received adequate prior notice.
Chase’s contention that the States received CAFA notice is irrelevant because this sanction is
directed at Baron & Budd, not the States. Furthermore, Chase’s sole basis for finding “minimum
contacts” is that the firm “regularly practices in the Southern District of Florida.” However,
under established law, such appearances do not count as in personam contacts.
Second, Chase is unable to show that the injunction was violated. The core issue Chase
raises—that the States represent, and are “in privity” with, absent class members who released
their claims—has already been litigated and decided favorably to the States and against Chase.

1

State of West Virginia ex rel. Darrell McGraw, Attorney General v. JP Morgan Chase & Co.,
et al., Civil No. 11-c-94-N (Cir. Ct. Mason Cty.); Jim Hood, Attorney General of the State of
Mississippi, ex rel. State of Mississippi v. JP Morgan Chase & Co., et al., Civil No. G-20121085-T1 (Chancery Ct., 1st Jud. Dist., Hinds Cty.); State of Hawaii ex rel. David Louie, Attorney
General v. JP Morgan Chase & Co., et al, Civil No. 12-1-0985-04 (1st Cir. Ct., Hawaii).
1

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

Chase conveniently overlooks the fact that the statutes authorizing the Enforcement
Actions vest the claim in the States themselves, and specifically authorize the Attorneys General
to bring the claims on the States’ behalf. These statutes do not authorize any citizen to raise,
much less settle, the States’ claims. The case law overwhelmingly holds that where the right of
action vests in the State, then the claim is a sovereign one and the State is the real party in
interest. Moreover, the Supreme Court has held that a private litigant cannot compromise or
dismiss sovereign claims. Chase seizes on only one of several elements of requested damages in
the States’ actions, but even there Chase misstates the operative state laws. Chase’s suggestion
that only the States’ penalties and injunctive claims are sovereign rests on a mistaken conflation
between absent class members’ claim for restitution and the States’ other equitable remedies,
such as disgorgement. They are not equivalents, and nor is the State in privity with or
representing the Settlement Class Members.
Third, there is no basis for sanctioning Baron & Budd as the States’ agent in the
Enforcement Actions for violating the injunction—an injunction which Chase agrees does not
and cannot be applied to the States. Moreover, the law is clear that a law firm, while representing
its client, acts in its client’s capacity and not in its own. The States’ Eleventh Amendment and
due process rights invalidate the application of this Court’s injunction as to them. Thus, Baron &
Budd cannot be sanctioned for purportedly violating an invalid injunction.
Finally, Chase has no basis for invoking this Court’s jurisdiction to enjoin non-parties to
the underlying action. Chase cites no case where the court issued a post-suit order against nonparties to the litigation, after the litigation was finally closed, for allegedly bringing a non-party’s
claims in another action. Every court to address the question—including most recently the
Middle District of Florida in another payment protection plan case—has refused to issue such an
order, finding that the scope of a Court’s preclusive order should be decided in the later court
that currently has the case.

2

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

II.

BACKGROUND
A. The Kardonick Settlement
In late 2010, three customers of Chase Bank (USA), N.A. and its parent, JP Morgan

Chase & Co. (together “Chase”), sued Chase for misleading them about Chase’s payment
protection products, and other incidental and ancillary credit card features. Chase charged them
monthly fees for products and services that they never agreed to, did not understand, and could
not capitalize on or redeem. See generally, Docket No. 16-1 (Amended Complaint).
The three matters were consolidated in this Court for settlement purposes, and soon
thereafter, the parties filed a comprehensive global class settlement on December 20, 2010.
Docket No. 16. The case pending in this Court, Kardonick v. JP Morgan Chase & Co. et al., No.
1:10-cv-23235, became the lead matter. None of the States, nor Baron & Budd, was a party to
the matter, nor was Baron & Budd legal counsel to any of the parties.
The Plaintiffs then moved for final approval of the settlement, which was granted by this
Court on September 16, 2011. See Docket No. 384 (“Final Approval”). The Court certified the
following settlement class which are also defined as “Settlement Class Members”:
All Chase Cardholders who were enrolled or billed for a Payment
Protection Product at any time between September 1, 2004 and November
11, 2010. Excluded from the class are all Chase Cardholders whose Chase
Credit Card Accounts that were enrolled or billed for a Payment
Protection Product were discharged in bankruptcy.
Id. at p. 2 ¶3.
The Court concluded that “Notice was disseminated to members of the Settlement Class
in accordance with the terms set forth in the Settlement Agreement” as well as to each of the
states under CAFA. Id. at p. 3 ¶9 (emphasis added). The Court then dismissed all claims in the
Amended Complaint with prejudice, stating that “the Settlement Class Representatives and each
and every one of the Settlement Class Members unconditionally, fully, and finally releases and
forever discharges [Chase] from the Released Claims.” Id. at p. 4 ¶16.
The Court also entered the following anti-suit injunction:
Each and every Settlement Class Member, and any person actually or
purportedly acting on behalf of any Settlement Class Member(s), is hereby
permanently barred and enjoined from commencing, instituting,
continuing, pursuing, maintaining, prosecuting, or enforcing any Released
Claims (including, without limitation, in any individual, class or putative
class, representative or other action or proceeding), directly or indirectly,

3

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

in any judicial, administrative, arbitral, or other forum, against the
Released Parties.
Id. at 5 ¶17. Other provisions limit the scope of the settlement to “persons.” 2
B. The Enforcement Actions
Independent of the Kardonick matter, the Attorneys General of the states of West
Virginia, Mississippi, and Hawaii instituted their own enforcement actions in their respective
state courts (the “Enforcement Actions”). 3
The Enforcement Actions seek to prosecute and punish Chase for its actions related to its
marketing, sales, enrollment and administration of its payment protection schemes to each
State’s consumers. Id. The Enforcement Actions seek to impose State-designated and crafted
injunctive relief and civil penalties, as well as seek all other remedies to which the States are
entitled. Id. Each of the Enforcement Actions is brought in the name of the State. Id.
Rather than move to dismiss or stay the actions in their respective courts on preclusion
grounds, Chase removed each of them to federal Court. The West Virginia remand motion has
already been granted. West Virginia ex rel. McGraw v. JPMorgan Chase & Co., 842 F. Supp. 2d
984 (S.D. W. Va. 2012). The others are currently pending. Now, nearly a year after the first
Enforcement Action was filed, and again instead of filing motions to dismiss or stay and without
even attempting to show how the court’s anti-suit injunction was violated, Chase moves to
sanction Baron & Budd, one of the law firms representing the States.
For the reasons assigned below, Chase’s self-serving attempt to obstruct Baron & Budd’s
practice of law is unfounded. And, while the other firm subjected to Chase’s Motion, Golomb &
2

For example, the stay only applies to actual class members or a “Person”. Id. at 6 ¶20 (stay
applies to “proceeding brought by a Settlement Class Member or any Person actually or
purportedly acting on behalf of any Settlement Class Member(s)”) (emph. supp.). In addition,
the preliminary approval order only stayed “all Settlement Class Members, and any person
actually or purportedly acting on behalf of any Settlement Class Member(s).” See Stipulation
and Agreement of Class Action Settlement, Docket No. 16, p. 14 ¶III.C.7 (emph. supp.).
Repeatedly, the stipulated class action settlement by its terms is limited to “persons”. Id. at p.
16 ¶IV.A.4 (referencing “all Persons who have timely and properly opted out”), id. at p.
16 ¶IV.A.7 (“permanently bars and enjoins all Settlement Class Members, and any Person
actually or purportedly acting on behalf of any Settlement Class Members”).
3
See Exhibits A-C to Chase Motion, State Court Enforcement Action Petitions (State of West
Virginia ex rel. Darrell McGraw, Attorney General v. JP Morgan Chase & Co., et al., Civil No.
11-c-94-N (Cir. Ct. Mason Cty.); Jim Hood, Attorney General of the State of Mississippi, ex rel.
State of Mississippi v. JP Morgan Chase & Co., et al., Civil No. G-2012-1085T1 (Chancery Ct.,
1st Jud. Dist., Hinds Cty.); State of Hawaii ex rel. David Louie, Attorney General v. JP Morgan
Chase & Co., et al, Civil No. 12-1-0985-04 (1st Cir. Ct., Hawaii)).
4

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

Honik, P.C., is responding separately, the undersigned notes that Chase’s challenge to that firm
is equally invalid.
III.

ARGUMENTS AND AUTHORITIES
To hold a party in contempt, the moving party must prove by clear and convincing

evidence that: (1) a valid court order was in effect; (2) the order was clear and unambiguous; and
(3) the alleged violator could have complied with the court’s order, had he chosen to do so. See
Riccard v. Prudential Ins. Co., 307 F.3d 1277, 1296 (11th Cir. 2002). On the other hand, it is a
root principle that a party cannot violate a court order that does not apply to it, and therefore
cannot be held in contempt. See McDonald v. Redstone Fed. Credit Union, 374 Fed. App’x. 937,
939 (11th Cir. 2010).
Chase has no evidence, much less “clear and convincing evidence” that (1) the injunction
has been violated at all, or (2) the injunction is valid as applied to Baron & Budd in its personal
capacity or as an agent of the States.
A. Baron & Budd is a Complete Stranger to These Proceedings—Therefore,
Enforcing the Injunction Against Baron & Budd Would Violate the Firm’s
Right to Due Process
This Court cannot sanction Baron & Budd either in its personal capacity or as the agent
of the States. Where a court lacks personal jurisdiction over a party, that party cannot be bound
by the Court’s rulings. Ortiz v. Fibreboard Corp., 527 U.S. 815, 845 (1999). An attempt to bind
a party without obtaining personal jurisdiction over it violates due process. Id. While Rule 23’s
class notice requirement can be grounds for asserting personal jurisdiction over a non-party, it
only applies to identified class members who receive proper class notice. See Ortiz, 527 U.S. at
848 (cite om.).
Here, due process is not satisfied because Chase effectively concedes from the outset
that, among other things:
•
•

Baron & Budd was not a party to Kardonick, did not represent any of the
Kardonick parties, and neither negotiated nor signed the settlement agreement;

•

Baron & Budd was not given Class Notice, CAFA Notice, and was not even
mentioned in a single paper filed in support of the Court’s Final Approval Order;

•

5

Baron & Budd has not submitted to the jurisdiction of this Court;

Baron & Budd was not offered the opportunity—and would have had no
standing—to object to the scope of the settlement; and

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

•

Baron & Budd was not representing the States at the time the Opt-Out period
ended.

That Baron & Budd was neither a party nor counsel to a party to the Kardonick
settlement agreement is dispositive. “It goes without saying that a contract cannot bind a
nonparty.” E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 294 (2002). Because Baron & Budd
was never defined as a class member and never received class notice, this Court cannot exercise
personal jurisdiction over the firm. See In re Diet Drugs Prods. Liab. Litig., 369 F.3d 293, 310
(3d Cir. 2004) (“due process considerations counsel against binding absent potential class
members to understandings that were not made express in the class notice or settlement
agreement”).

Still further, Chase’s contention that the States received a CAFA notice is

irrelevant: Chase’s Motion is intentionally not directed at the States—it is directed at Baron &
Budd, whom Chase admits did not receive the notice. 4
The only “evidence” Chase makes as to Baron & Budd’s “minimum contacts” is that the
firm has practiced in the Southern District of Florida. This is hardly “clear and convincing.”
Moreover, a law firm that appears in the state to represent a party is not there in its personal
capacity, and therefore, another court cannot claim personal jurisdiction over the firm based
upon those contacts. See Sawtelle v. Farrell, 70 F.3d 1381 (1st Cir. 1995); Mayes v. Leipziger,
674 F.2d 178 (2d Cir. 1982). See also Bona Fide Demolition & Recovery, LLC v. Crosby Constr.
Co. of La., Inc., 2010 U.S. Dist. LEXIS 52236, at *10-11 (E.D. La. May 13, 2010) (“an
attorney’s choice to represent a client in another forum does not automatically confer personal
jurisdiction [over the attorney] if the claim does not arise from the lawyer’s contacts with the
forum.”) (cit. & quote om.).
Therefore, Chase’s Motion fails to establish that the Court had personal jurisdiction over
Baron & Budd when it issued the injunction, nor does it have jurisdiction over the firm now.
Sanctioning Baron & Budd would violate the firm’s right to due process.

4

It is improper on several levels to impute notice to a non-party or its counsel. See Blaylock v.
Guarini, 2011 U.S. Dist. LEXIS 47323, at **2-3 (E.D. Pa., May 2, 2011). And there is no basis
for imputing Golomb & Honik’s knowledge as lead counsel to Baron & Budd just because they
became co-counsel representing the States. See cf. Baybrook Homes v. Banyan Constr. & Dev.,
991 F. Supp. 1440, 1441-42 (M.D. Fla. 1997) (rejecting imputation of knowledge from counsel
for a client in prior case to mere co-counsel in subsequent case).
6

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

B. Chase Fails To Prove That The Injunction Was Violated
1. Chase Cannot Prove That Baron & Budd is Representing Any “Released
Claims” In Violation of the Injunction
This Court’s Final Judgment and Order of Dismissal was expressly limited to “Parties to
the Litigation, including all members of the following Settlement Class,” which was defined as:
All Chase Cardholders who were enrolled or billed for a Payment
Protection Product [] between September 1, 2004 and November 11, 2010.
See Docket No. 384 at p. 2 ¶3. Plainly, neither Baron & Budd nor the States were included
within the scope of the Class Definition. Therefore, neither is a “Settlement Class Member”
subject to the settlement agreement or the Court’s Final Approval Order.
While the Court’s anti-suit injunction extends to “[e]ach and every Settlement Class
Member, and any person actually or purportedly acting on behalf of any Settlement Class
Member(s),” it only bars suits that raise “Released Claims.” See Docket No. 384, p. 5. The Final
Order and injunction do not define “Released Claims,” however, the Settlement Agreement does.
The “Released Claims” include “any and all Claims, which the Settlement Class
Representatives or any Settlement Class Member ever had, now have, or may have in the future.”
See Docket No. 16, p. 10. Because all Released Claims must belong only to Class Members, and
because neither Baron & Budd nor the States are Class Members, Baron & Budd, in asserting the
States’ claims, have not asserted any “Released Claims” by definition.
Independently, the Kardonick settlement injunction does not enjoin the States because the
injunction only applies to a “person” (see Background §II.A and note 2 supra). The States were
not placed on notice that the term “person” is allegedly defined to include the States. 5 Nor are

5

See Rine v. Imagitas, Inc., 590 F.3d 1215, 1219 n. 4 (11th Cir. 2009) (the State of Florida is
not a person; citing Driver’s Privacy Protection Act); State v. French, 77 Haw. 222, 230 (Haw.
Ct. App. 1994) (“a ‘person’ is defined, ‘in general usage, [as] a human being (i.e. natural
person).’ Black's Law Dictionary 1143 (6th ed. 1990).”); Pruitt v. W. Va. Dep't of Pub. Safety,
222 W. Va. 290, 295-296, 664 S.E.2d 175, 180-81 (2008) (“in common usage, the term ‘person’
does not include the sovereign, and statutes employing the word ‘person’ are ordinarily
construed to exclude it.”); Haw. Rev. Stat. § 480-1 (“‘Person’ or ‘persons’ includes individuals,
corporations, firms, trusts, partnerships, limited partnerships, limited liability partnerships,
limited liability limited partnerships, limited liability companies, and incorporated or
unincorporated associations, existing under or authorized by the laws of this State, or any other
state, or any foreign country.”); W. Va. Code § 46A-1-102(31) (“‘Person’ or ‘party’ includes a
natural person or an individual, and an organization.”).
Moreover, the judgment refers to the definitions in the stipulated Settlement Agreement,
which defines person as follows: “‘Persons’ includes, without limitation, natural persons, firms,
banks, corporations, and businesses.” Settlement Agreement, Docket No. 16, p. 9 ¶II(hh); cf.
7

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

attorneys the type of “representative” contemplated by the language of the settlement agreement
and order. Rather, that term was intended to mean such persons as personal representatives of
the estates, guardians, conservators, parents, and other persons acting as the party in the action,
not their attorneys.
Therefore, Chase has failed to demonstrate a prima facie violation of the injunction that
would warrant sanctions.
2. The States Attorneys General are Neither Representing the Claims of,
Nor “In Privity” With, the Settlement Class Members
Chase’s secondary position is that the Court’s injunction applies to the Parties, the
Settlement Class Members, and “any person actually or purportedly acting on behalf of” a Class
Member. See Chase Motion at p.2. Chase contends that Baron & Budd is “acting on behalf of” a
Class Member by representing the States Attorneys General who are representing Class
Members’ released claims and who are “in privity” with absent class members. Yet, Chase
cannot dispute the facts that (1) it has already litigated this very issue and lost; (2) the
Enforcement Actions have only raised statutory claims vested in the States, and for which the
Attorneys General are statutorily authorized to bring; and (3) no absent class member was
authorized to bring, much less settle, the States’ claims.
3. Chase Has Already Litigated And Lost the Question of Whether The
West Virginia Attorney General is Representing or “In Privity” With
Absent Class Members
Chase has already litigated the very issue it presents to this Court against West Virginia
and lost. That decision is the law of the case in West Virginia and cannot be disturbed here.
Chase’s cohort, Capital One, likewise attempted to litigate the same question in Spinelli v.
Capital One Bank, USA, No. 8:08-cv-132 (M.D. Fla.), and lost. Both courts found the same
thing: the Enforcement Actions raised sovereign claims and were not representative actions.
Chase provides no meaningful way to distinguish the issues it raises here from these two
decisions.
West Virginia ex rel. McGraw v. JP Morgan Chase & Co.
Before it sought to collaterally attack the West Virginia action in this forum, Chase
removed the West Virginia Enforcement Action to the Federal Court under CAFA. Chase

also 1 Del. C. § 302(15) (defining “persons” as “corporations, companies, associations, firms,
partnerships, societies and joint-stock companies, as well as individuals.”).
8

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

contended that the action is a class action on behalf of West Virginia consumers. The district
court granted the Attorney General’s motion for remand. See West Virginia ex rel. McGraw v.
JPMorgan Chase & Co., 842 F. Supp. 2d 984, 995 (S.D. W. Va. 2012).
The district court held that “consumer protection actions brought by the Attorney General
under the WVCCPA [West Virginia Consumer Credit and Protection Act] are parens patriae
actions, not class actions.” Id. (citing West Virginia ex rel. McGraw v. CVS Pharmacy, Inc., 646
F.3d 169 (4th Cir.), cert. denied, 132 S. Ct. 761 (2011)). The Court further observed that “[t]he
WVCCPA specifically authorizes the West Virginia Attorney General to seek both injunctive
and monetary relief for violations of the Act… as a parens patriae, that is, as the legal
representative of the State to vindicate the State's sovereign and quasi-sovereign interests, as well
as the individual interests of the State’s citizens.” 842 F. Supp. 2d at 995 (quoting CVS
Pharmacy, 646 F.3d at 176). The court concluded that, “when the Attorney General brings a
WVCCPA action, he does not act as one representative of a larger class of plaintiffs, but rather
as a trustee or a regulator.” Id. at 997.
That decision is now the law of the case in West Virginia, and Chase cites no justification
for this Court to collaterally undermine the district court in West Virginia.
Spinelli v. Capital One Bank (USA) N.A.
In Spinelli v. Capital One Bank, USA, No. 8:08-cv-132, 2012 U.S. Dist. LEXIS 118667
(M.D. Fla. Aug. 21, 2012), Capital One settled a class action raising similar claims as those in
the Enforcement Actions against itself and against Chase. Capital One, argued—as Chase does
here—that the court should enjoin prosecution of the Mississippi and Hawaii Enforcement
Actions pursuant to its global class settlement because they were fundamentally representative
actions, and were effectively relitigating released claims.
The district court there denied the injunction just two days after briefing closed. The
Court held that a consumer class action settlement and final approval order simply did not bind
the States or the Attorneys General. “The Court’s Order approving the settlement and closing
this case did not bind the States of Mississippi and Hawaii. The Attorney General of Mississippi
and Hawaii were not defined as class members and did not have an opportunity to participate in
the litigation or opt out of the class. It would be a violation of the Due Process clause to now
enjoin such Attorney General via the requested injunction.” Id. at *9 (citing Phillips Petroleum
Co. v. Shutts, 472 U.S. 797 (1985)). The court further elaborated that the “relitigation” exception

9

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

to the All Writs Act did not apply because the “relitigation prong does not authorize injunctions
against non-parties.” Id. at *10 (citing response brief of the State of Mississippi). And the court
agreed with the States that “the States’ sovereign interests were neither raised, actually litigated,
nor resolved in the Spinelli action.” Id. at 11.
Chase does not meaningfully distinguish its own circumstances from those in Ex rel.
McGraw or Spinelli. Nor does Chase show how those District Court Judges got it wrong.
4. The States’ Claims Are Statutorily Distinct from the Absent Class
Members’ Claims.
Chase’s Motion is conspicuously lacking in any citation to the statutes underlying the
States’ Enforcement Actions. Each of the States of West Virginia, Mississippi, and Hawaii,
statutorily vests in the State the right to sue to prosecute, enjoin and seek penalties for consumer
frauds. See W.Va. Code Ann. § 46A-7-108, § 46A-7-109, and § 46A-7-111(1)–(2); Miss. Code
Ann. § 75-24-9, § 75-24-11, and § 75-24-19; Hawaii Rev. Stat. § 661-10, § 480-15 and § 4803.1. Incident to these actions, each of the States’ consumer protection acts authorizes the States’
agency—the Attorney General or consumer protection department—to ask for and receive such
ancillary equitable remedies and relief. See W.Va. Code Ann. § 46A-7-108 and § 46A-7-109;
Miss. Code Ann. § 75-24-11 and § 75-24-23; Hawaii Rev. Stat. § 480-3.1.
On the other hand, in each State, private consumer actions and remedies are authorized
under separate provisions that only apply to private citizens. See W.Va. Code Ann. § 46A-6106(a); Miss. Code Ann. § 75-24-15(1) and (4); Hawaii Rev. Stat. § 480-13. 6 None of these
provisions in West Virginia, Mississippi or Hawaii authorizes a citizen to bring, much less
release, any of the claims that the State is authorized to bring.
Therefore, the States’ statutes themselves rebut Chase’s position that the Attorneys
General are bringing Class Members’ released claims, or that the Released Claims could have
included those that are being raised in the Enforcement Actions. Nothing in Chase’s Motion—
not even the disembodied excerpts from the States’ pleadings—can change the fact that as a

6

Chase’s oblique reference to Haw. Rev. Stat. § 480-14(b), which authorizes the State to bring a
representative class action on behalf of injured consumers, is a red herring and highlights the
issue: the State has not invoked this provision as a basis for suit in the Enforcement Action. The
express inclusion of the representative nature of a suit under § 480-14(b) is sufficient grounds to
conclude that the exclusion of those grounds in other provisions means the other provisions are
not representative in nature.
10

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

matter of State law, the Attorneys General have a right to bring the claims raised in the
Enforcement Actions in the name of the State.
5. All of the States’ Enforcement Action Claims are Sovereign—None of the
States’ Claims Was Brought in their Representative Capacity
It is settled law that where the State has an interest in the action, then it is the real party in
interest in a lawsuit, and the attorney general bringing the lawsuit is deemed the alter ego of the
State. See Tradigrain, Inc. v. Mississippi State Port Authority, 701 F.2d 1131, 1132 (5th Cir.
1983). The Fourth and Ninth Circuits have recently held that in an action like the States’
Enforcement Actions, the state is the real party in interest when it sues in parens patriae. 7
This is not a novel legal development. The Supreme Court has long recognized that states
may bring cases in parens patriae, using a private individual’s injury as a vehicle for the purpose
of advancing the state’s sovereign interest and general welfare. In Georgia v. Tennessee Copper
Co., 206 U.S. 230, 237 (1907), Justice Holmes held that Georgia was the real party in interest in
a suit brought under its parens patriae authority to vindicate the interest of the state in remedying
a pollution injury to a group of citizens, because the state “has an interest independent of” the
titles of its citizens. In Pennsylvania v. West Virginia, 262 U.S. 553 (1923), the Supreme Court
held that the state of Pennsylvania was the real party in interest, and could sue on behalf of
private citizens not merely to protect them, but to vindicate the state’s sovereign interest in
unburdening interstate commerce.
Even if the States’ Enforcement Actions could be characterized as a hybrid, brought on
behalf of public and private interests simultaneously, that would not change the ultimate
conclusion that the settlement reached in this matter does not preclude the States’ independent
Enforcement Actions. The Eleventh Circuit, in Herman v. South Carolina Nat’l Bank, 140 F.3d
7

See West Virginia v. CVS Pharm., Inc., 646 F.3d 169, 176 (4th Cir. 2011) (holding that where
attorney general files suit “independently of any consumer complaints, as a parens patriae, that
is, as the legal representative of the State to vindicate the State’s sovereign and quasi-sovereign
interests, as well as the individual interests of the State's citizens” then the state is the real party
in interest); Nevada v. Bank of Am. Corp., 672 F.3d 661, 670 (9th Cir. 2012) (same); West
Virginia v. Morgan Stanley & Co., 747 F. Supp. 332, 338 (S.D. W. Va. 1990) (“So long as the
state is more than a nominal or formal party and has a real interest, pecuniary or otherwise, in the
outcome of the litigation, it has been held that the State is a real party to the controversy[.]”). La.
ex rel. Caldwell v. Allstate Ins. Co., 536 F.3d 418 (5th Cir. 2008), similarly recognized that
where the attorney general brings suit on behalf of the state, then the state is the real party in
interest. See 536 F.3d at 430. While Caldwell found, on the facts before it, that the state was
asserting the private claims of Louisiana citizens, making the latter the real parties in interest,
here, the opposite is the case.
11

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

1413, 1425 (11th Cir. 1998), recognized the “well-established general principle that the
government is not bound by private litigation when the government’s action seeks to enforce a []
statute that implicates both public and private interests.” Other courts agree. 8
Nor can a state’s sovereign interests be compromised or impeded by a private
agreement—even one entered into by an aggrieved individual. For example, in E.E.O.C. v.
WaffleHouse, Inc., 534 U.S. 279 (2002), the Supreme Court concluded that a government
entity’s interest in vindicating a wrong could not be vitiated or compromised by the aggrieved
private party’s agreement. There, the E.E.O.C. had filed an enforcement action against an
employer on behalf of a former employee for violations of the Americans with Disabilities Act.
The Supreme Court held that a mandatory arbitration clause in the former employee's
employment contract did not bar the E.E.O.C. from pursuing victim-specific judicial relief on
behalf of the employee. The Court reasoned that even when the E.E.O.C. pursues entirely victimspecific relief, this also vindicates a public interest. Id. at 296.
Chase attempts to distinguish these cases by contending that the Enforcement Actions
seek to revive the settled Claims of absent class members. But no-where does Chase show that
the States’ causes of action are being brought on behalf of consumers. Chase instead relies on
semantics to conflate the so-called “restitution” that the Settlement Class Members received in
settlement, with the method of calculating the equitable relief the States may seek incident to
their Enforcement Actions. It has long been understood that even though different equitable
remedies may be calculated the same way, they are still separate remedies. See FTC Policy
Statement on Monetary Equitable Remedies in Competition Cases, July 23, 2003 (explaining that
although restitution and disgorgement can be calculated the same way, they serve different
8

See also Commodity Futures Trading Comm’n v. Commercial Hedge Serv., Inc., 422 F. Supp.
2d 1057 (D. Neb. 2006) (federal agency not barred from seeking additional restitution for private
parties who had entered into settlement agreements with the defendant company). See also
Secretary of Labor v. Fitzsimmons, 805 F.2d 682, 692 (7th Cir. 1986) (en banc) (“The
Government is not barred by the doctrine of res judicata from maintaining independent actions
asking courts to enforce federal statutes implicating both public and private interests merely
because independent private litigation has also been commenced or concluded.”); Buffalo
Laborer Sec. Fund v. J.P. Jeanneret Assocs. (In re Beacon Assocs. Litig.), 09 Civ. 8362, 2012
U.S. Dist. LEXIS 63549, **38-39 (S.D.N.Y. May 3, 2012) (“In the event that the private
plaintiffs prevail on their claims against Defendants, the Secretary will not be barred by the
doctrine of res judicata from pursuing her action.”) (citing Fitzsimmons); United States v. Katz,
No. 10 Civ. 3335, 2011 U.S. Dist. LEXIS 59159, at *15 (S.D.N.Y. June 2, 2011) (“governmental
agencies are not bound by private litigation when the agency's action seeks to enforce a federal
statute that implicates both public and private interests.”).
12

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

policy purposes). 9 In other words, incident to the States’ Enforcement Actions for injunctive
relief and civil penalties (which Chase expressly says it is not challenging), they may seek to
disgorge Chase’s ill-gotten gains. That remedy may necessitate calculating what was taken from
the citizens of the States. That does not, however, convert the equitable relief that the States are
entitled to pursue in their sovereign capacities into a resurrection of the absent class members’
released restitution claims.
Moreover, Chase admits that to the extent the States seek injunctive relief and civil
penalties, they have not violated the Court’s Final Order. Yet, federal courts have long
recognized that where, as here, the primary driver of the state’s suit is seeking to deter and
punish a bad actor to protect the state’s marketplace, seeking ancillary relief does not alter the
character of the case. The district court in New York v. General Motors Corp., 547 F. Supp. 703,
706-07 (S.D.N.Y. 1982) rightly observed that “[r]ecovery of damages for aggrieved consumers is
but one aspect of the case. The focus is on obtaining wide-ranging injunctive relief designed to
vindicate the State’s quasi-sovereign interest in securing an honest marketplace for all
consumers. That recovery on behalf of an identifiable group is also sought should not require this
Court to ignore the primary purpose of the action and to characterize it as one brought solely for
the benefit of a few private parties.”
Therefore, Chase’s false equivalency between the equitable relief that the States are
entitled to seek in their sovereign capacities, and the class members’ private restitution claims, is
baseless. Chase has failed its prima facie burden of proving the basic refrain on which it
continually relies: That the claims in the Enforcement Actions are Released Claims, brought in a
representative capacity or “in privity” between the Attorneys General and the Class Members.
C. Baron & Budd is the States’ Agent for the Enforcement Actions—Therefore,
Chase’s Attempt to Avoid the States’ Eleventh Amendment and Due Process
Defenses Fails
1. Because the Injunction is Invalid as Applied to the States Under the Eleventh
Amendment or Due Process Clause, Baron & Budd Cannot be Sanctioned
for Representing Claims in Violation of an Invalid Injunction
In its brief, Chase continually contends that the “claims Respondents [i.e., Baron &
Budd] have asserted,” violated the Court’s injunction. What Chase obfuscates—perhaps

9

Available online at http://www.ftc.gov/os/2003/07/disgorgementfrn.htm.
13

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

intentionally so—is the fact that Baron & Budd’s entire role is as the States’ legal counsel—i.e.,
their agent—in their Enforcement Actions.
Because the attorney is the litigant’s agent, the attorney’s acts (or failures to act) within
the scope of the representation are treated as those of his client. See Link v. Wabash R.R. Co.,
370 U.S. 626, 633-34 & n.10 (1962); Barger v. City of Cartersville, 348 F.3d 1289, 1295 (11th
Cir. 2003) (citing same). Chase never explains how it is possible that Baron & Budd—the
State’s legal counsel in their Enforcement Actions—can be subject to and liable for violating the
Court’s injunction while simultaneously contending that the States are not subject to the
injunction.
Moreover, Chase’s attempt to maneuver around the States’ Eleventh Amendment and due
process defenses by suggesting that only Baron & Budd’s coffers would be invaded is a straw
man. Because Baron & Budd is the States’ agent, the issue is not who would be paying the
sanction; rather, the issue is whether the injunction that Baron & Budd is accused of violating
legitimately and validly applies to the States in the first place. It does not.
Here, because the injunction does not bar the States’ Enforcement Action—whether
because it does not apply to them or because its application as to them is invalid—then Baron &
Budd cannot be held liable for violating the injunction in representing the States.
2. The Injunction is Invalid Under the Eleventh Amendment’s Broad Grant
of Sovereign Immunity to Equitable Actions
The States enjoy immunity under the United States Constitution, Eleventh Amendment,
from actions at law and equity. U.S. CONST. Amend. 11. The Supreme Court recently reiterated
the sanctity of state sovereign immunity:
[W]e have understood the Eleventh Amendment to confirm the structural
understanding that States entered the Union with their sovereign immunity
intact, unlimited by Article III’s jurisdictional grant…. [A]bsent waiver or
valid abrogation, federal courts may not entertain a private person’s suit
against a State.
Va. Office for Prot. & Advocacy v. Stewart, 131 S. Ct. 1632, 1637-38 (2011) (cit. om.).
As a mere statutory grant of injunctive authority, the All Writs Act is not grounds for
abrogating sovereign immunity. See Horne v. Flores, 557 U.S. 433, 440 n.1 (2009) (“We have
previously held that Congress may validly abrogate the States’ sovereign immunity only by
doing so (1) unequivocally and (2) pursuant to certain valid grants of constitutional authority.”).

14

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

Moreover, a century of Supreme Court jurisprudence has held that there is a strong
presumption against a federal court entertaining an action for, or issuing, an injunction against a
state official in his official capacity, as this is tantamount to an injunction against the state itself.
The Court’s decision in Ex parte Young, 209 U.S. 123 (1908), first held that an exception to
sovereign immunity existed where the state official sought or threatened to enforce a law that
was being challenged as unconstitutional. See 209 U.S. 150-51. The Court then reiterated in
Massachusetts State Grange v. Benton, 272 U.S. 525, 527 (1926), that “no injunction ought to
issue against officers of a State clothed with authority to enforce the law in question, unless in a
case reasonably free from doubt and when necessary to prevent great and irreparable injury.”
The Supreme Court’s decision in Younger v. Harris, 401 U.S. 37, 46-50 (1971) observed that
such “irreparable injury”—one of the traditional elements for issuing an injunction—requires
raising an issue of constitutionality, and is not met by allegations of the “the cost, anxiety and
inconvenience of having to defend against” a state enforcement action. There has to be a
challenge to the constitutionality of the statute sought to be enforced.
Chase raises no constitutional issue, and the States have not waived sovereign immunity.
Therefore, the States are absolutely immune from the prayed-for injunction. See cf. Lord Abbett
Mun. Income Fund, Inc. v. Tyson, 671 F.3d 1203, 1207 (11th Cir. 2012) (dismissing injunctive
suit against state due to absence of allegation of past or imminent constitutional violation).
3. Applying the Injunction to the States or their Agents Would Violate the
States’ Due Process Rights
To enter a valid, enforceable injunction precluding a litigant from proceeding with civil
litigation in another forum, the enjoining court must possess personal jurisdiction over the party.
See In re Rationis Enter., Inc. of Panama, 261 F.3d 264, 267-68 (2d Cir. 2001) (vacating antisuit injunction for determination of objection that Court lacked personal jurisdiction). As the
Rationis Court emphasized, a “court may not grant a final, or even an interlocutory, injunction
over a party over whom it does not have personal jurisdiction.” Id. at 270 (citing Weitzman v.
Stein, 897 F.2d 653, 659 (2d Cir. 1990)).
Neither Chase’s pleadings, the settlement documents, nor the final order recites any basis
for the exercise of personal jurisdiction over the State, thus, denial of this Motion is appropriate.
See Pennington Seed, Inc. v. Produce Exch. No. 299, 457 F.3d 1334, 1344 (Fed. Cir. 2006)
(dismissal of claims against State officials acting in official capacity appropriate when no
allegations of contact between officials and forum were made).
15

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

Chase also has set forth no facts supporting the States’ minimum contacts with the State
of Florida. There are none. Because West Virginia, Mississippi, and Hawaii have not submitted
to Florida’s jurisdiction, and minimum contacts do not exist between them and the State of
Florida, there is no personal jurisdiction over any State. Any injunction or sanction order would
be unconstitutional.
Furthermore, the States were not parties to the Kardonick litigation or settlement.
Therefore, they cannot be bound by either the settlement or the injunction. See E.E.O.C., 534
U.S. at 294. And because the States were not class members and did not receive class notice,
they cannot be bound to the settlement under Rule 23’s class notice scheme. See Ortiz, 527 U.S.
at 845 (that “no reading of the Rule can ignore the [Rule Enabling] Act’s mandate that ‘rules of
procedure ‘shall not abridge, enlarge or modify any substantive right’.”). 10
Nor does the fact that CAFA notices were sent bind the States’ claims or activity to the
Court. See CAFA Notice statute, 28 U.S.C. § 1715(f) (“Rule of construction. Nothing in this
section shall be construed to expand the authority of, or impose any obligations, duties, or
responsibilities upon, Federal or State officials.”) (emphasis added).
Perhaps most significantly, Chase never shows how the States received adequate
representation. To bind a non-party through class representation requires not only representation,
but adequate representation. See Ortiz, supra; Fed. R. Civ. P. 23(a)(4). The States, as non-class
members, could not possibly have received any representation here, much less adequate
representation. The States’ sovereign interests give them discretion as to the injunctive relief
fashioned, and exclusive authority over the monetary remedies they may seek. Regardless of
whether the settlement is sufficient consideration for the release of the class claims, the
settlement provides no consideration for the release of the States’ sovereign claims.
In sum, there is no basis for this Court to exercise personal jurisdiction over the States.
See cf. Spinelli, 2012 U.S. Dist. LEXIS 118667, at *9 (“The Court’s Order approving the
settlement and closing this case did not bind the States of Mississippi and Hawaii. The Attorney
General of Mississippi and Hawaii were not defined as class members and did not have an

10

Even if the Class Notice had been sent to the States, the Class Notice by its own terms only
applied to “Chase cardholders.” (Docket No. 16-5 (Copy of Class Notice)). Thus, the class notice
by its own terms did not address the States’ interests. See In re Diet Drugs, 369 F.3d at 310 (“due
process considerations counsel against binding absent potential class members to understandings
that were not made express in the class notice or settlement agreement”).
16

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

opportunity to participate in the litigation or opt out of the class. It would be a violation of the
Due Process clause to now enjoin such Attorney General via the requested injunction.”).
Accordingly, the injunction cannot validly be applied to the States or their sovereign
claims—to do so would violate both the States’ Eleventh Amendment immunity and their right
to due process of law. Baron & Budd likewise cannot be found to have violated the invalid
injunction when it represents the States in their Enforcement Actions. Cf. Link v. Wabash, supra.
D. The All Writs Act Does Not Apply Here—There Is Nothing Being “Relitigated”
A party cannot seek an injunction to enjoin a separate proceeding merely to enforce the
terms of a settlement agreement. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375,
379 (1994). When a party seeks to use a final judgment in one court to enjoin or dismiss the
action in a second court, it is for the second court, not the first one, to determine whether the first
judgment bars the second case. See id.; see also 18 Charles Alan Wright, Arthur R. Miller &
Edward H. Cooper, Federal Practice & Procedure § 4405 (2d ed. 2010).
For example, in Sandpiper Vill. Condo. Ass’n v. Louisiana-Pacific Corp., 428 F.3d 831
(9th Cir. 2005), cert. denied, 548 U.S. 905 (2006), the appeals court applied the Anti-Injunction
Act and reversed a federal district court’s All Writs anti-suit injunction. The defendant invoked
the injunction issued after a nationwide class settlement that purportedly released all claims
arising out of the injuries to the class members. One distributor sued the defendant in a
Minnesota state court and obtained a favorable jury verdict, which the federal district court
enjoined. The Sandpiper Village court found the All Writs Act inapplicable because the prior
action was completed and the settlement obligations had been discharged. See 428 F.3d at 844.
Thus, there was no “continuing jurisdiction” to protect. The Sandpiper Village court also held
that an injunction is not necessary to protect or effectuate a court’s final judgment unless the
issues were in fact litigated in the federal court in the first instance. See id. at 848; see also
Estate of Brennan v. Church of Scientology Flag Serv. Org., 645 F.3d 1267, 1273 n.3 (11th Cir.
2011) (citing Smith v. Bayer Corp., 131 S. Ct. 2368 (2011); further cit. om.).
The Ninth Circuit found that the distributor’s claims had not actually been litigated
because, “[s]ignificantly,” the distributor “was not named as a party to the class action and was
not a member of the nationwide class.” See 428 F.3d at 848 (fn. om.). And the court expressly
rejected the contention that because the distributor’s claim was predicated on the injuries to the

17

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

class members, that made the distributor’s claim a released claim. 428 F.3d at 849. A number of
courts have followed Sandpiper Village in denying requests for injunctions. 11
The cases Chase relies on are inapposite. They either involved matters of continuing
settlement administration, or injunctions issued post-final settlement against the original class
members. For instance, Chase relies heavily on In re Baldwin-United Corp., 770 F.2d 328 (2d
Cir. 1985), for the proposition that a district court may bind non-parties to a global settlement.
However, unlike here, the district court in In re Baldwin-United noted that the attorneys general
were asserting actions for restitution directly on behalf of class members, and therefore the
attorneys general were essentially acting as private attorneys directly asserting the claims of
private citizens. 770 F.2d at 337. Moreover, the court was faced with trying to marshal the
diverse parties to a global settlement that the district court found was imminent, and the
injunction was necessary to bring order out of chaos. Id. 12 That is plainly not the issue here.
Here, the face of the Final Order states in large letters: “CLOSED CIVIL CASE.” There
is no money left to be paid to any plaintiff or defendant, no injunction being violated by any
party or absent class member, and no court oversight needed whatsoever. No case that Chase
cites has held that it was proper for a court to issue an injunction against a non-party to litigate its
claims. See Spinelli, 2012 U.S. Dist. LEXIS 118667, *10-11 (observing that the All Writs Act

11

See Hinds County, Mississippi v. Wachovia Bank N.A., 790 F. Supp. 2d 125, 132 (S.D.N.Y.
2011); Sohal v. Fed. Home Loan Mortg. Corp., No. C 11-01941, 2011 U.S. Dist. LEXIS 53278,
at *9 (N.D. Cal. May 18, 2011); Shingle Springs Band of Miwok Indians v. Sharp Image
Gaming, Inc., No. 2:10-cv-01396, 2010 U.S. Dist. LEXIS 109908, at ** 19-20 n.8 (E.D. Cal.
Oct. 15, 2010); Rio v. Credit Answers, LLC, No. 10cv346, 2010 U.S. Dist. LEXIS 31826, at *4
(S.D. Cal. Apr. 1, 2010); Hernandez v. SmithKline Beecham Pharm., No. 02-2750, 2006 U.S.
Dist. LEXIS 72846, at ** 20-21 (D.P.R. June 6, 2006).
12
Moreover, in In re Baldwin the question of interference with another court was not present
since the injunction was merely prospective to stop threatened suits. Here, Chase seeks to
prevent pending suits that it believes involve the “relitigation,” of released claims from the
closed Kardonick settlement.
Furthermore, The Second Circuit has clarified that the court’s entertainment of a large class
action or multi-district litigation does not per se vest the court with jurisdiction over all potential
parties. Consistent with the terms of the All Writs Act and Anti-Injunction Act, the court’s
jurisdiction is only triggered when there is a necessity of judicial oversight. See Ret. Sys. of
Alabama v. J.P. Morgan Chase & Co., 386 F.3d 419, 427 n.7 (2d Cir. 2004). In Ret. Sys. of
Alabama the Second Circuit rejected an argument similar to the one made here—that In re
Baldwin-United stands for the proposition that any injunction can issue at any time against any
third party to protect the settlement of a large case. The circuit court held that “defendants’
contention that Baldwin-United created a presumption that multidistrict class actions” confer
such universal jurisdiction was “unfounded.”
18

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

does not justify an “injunction to prevent a non-party from litigating its claims.”). Thus, the rule
in Sandpiper and Spinelli, and not In re Baldwin, applies here.
IV.

CONCLUSION
As Chase has not carried its burden of demonstrating that non-party Baron and Budd,

P.C. violated any applicable court order binding against Respondents, Chase’s motion to show
cause should respectfully be denied in its entirety, and with prejudice.

Dated: October 12, 2012

RESPECTFULLY SUBMITTED:
By: s/ Lewis S. “Mike Eidson Jr.
Lewis S. “Mike” Eidson Jr.
Fla. Bar No. 151088
(Lead Counsel pending pro hac vice admissions)
Francisco R. Maderal Jr.
Fla. Bar No. 0041481

COLSON HICKS EIDSON
255 Alhambra Circle, Penthouse
Coral Gables, Florida 33134
Phone: [phone]
Fax: [phone]
[e-mail]
[e-mail]
BARON & BUDD, P.C.
Russell W. Budd, Esq.
Laura J. Baughman, Esq.
J. Burton LeBlanc, IV, Esq.
S. Ann Saucer, Esq.
3102 Oak Lawn Avenue, Suite 1100
Dallas, TX 75219
Tel: [phone]
Fax: [phone]
Email: [e-mail]
[e-mail]
[e-mail]
[e-mail]

19

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 12th day of October, 2012, I filed the foregoing with
the Clerk of the Court using CM/ECF. I also certify that the foregoing is being served this day by
Notice of Electronic Filing generated by CM/ECF on all counsel of record entitled to receive
service.
s/ Lewis S. “Mike Eidson Jr.
Lewis S. “Mike” Eidson Jr.

20

Baron & Budd, P.C.’s Response in Opposition to Chase’s Motion to Show Cause