State of California v. IntelliGender, No. 13-56806 (9th Cir. 2014)
Annotate this CaseIntelliGender sold and advertised the IntelliGender Prediction Test as an accurate predictor of a fetus's gender using the mother's urine sample. The district court approved a Class Action Fairness Act (CAFA), 28 U.S.C. 1332(d), settlement between a nationwide certified class of purchasers of the Test and IntelliGender. The State subsequently filed an enforcement action against IntelliGender under the State's Unfair Competition and False Advertising Laws, largely based on the same claims as the class action. The court concluded that the district court correctly denied IntelliGender's motion to enjoin the State's enforcement action in its entirety where IntelliGender had not met its burden of showing that the CAFA class action settlement could bind the State in its sovereign capacity, where it asserted both public and private interests. The court agreed that a CAFA class action settlement, though approved by the district court, does not act as res judicata against the State in its sovereign capacity, even though many of the same claims are included in both actions. Because the State action is brought on behalf of the people, it implicates the public's interests as well as private interests, and therefore the remedial provisions sweep much more broadly. The court concluded, however, that the State is precluded from seeking the same relief sought in the CAFA class action where IntelliGender provided notice to the appropriate parties of the class action and the State chose not to participate. Therefore, the district court erred in denying IntelliGender's motion to enjoin the State's claims for restitution. Accordingly, the court affirmed in part and reversed in part.
Court Description: Class Action Fairness Act / Res Judicata. The panel affirmed the district court’s denial of IntelliGender, LLC’s motion to enjoin an entire enforcement action brought by the State of California under the State’s Unfair Competition and False Advertising Laws, but reversed the denial of IntelliGender’s motion to enjoin only the State’s restitution claims in the State’s action seeking relief for some individuals who were bound by a Class Action Fairness Act class action settlement concerning a nationwide class of disappointed purchasers of the IntelliGender Prediction Test, which purported to predict a fetus’s gender. The panel held that the district court correctly denied IntelliGender’s motion to enjoin the State’s enforcement action in its entirety. The panel held that a Class Action Fairness Act (“CAFA”) class action, though approved by the district court, did not act as res judicata against the State in its sovereign capacity, even though many of the same claims were included in both the CAFA action and the enforcement action. The panel further held that because the State action was brought on behalf of the people, it implicated the public’s interest as well as private interests, and therefore the remedial provisions swept much more deeply. The panel held that the district court erred in denying IntelliGender’s motion to enjoin the State’s claims for restitution because the State’s action, insofar as it sought restitution for individual members of the settlement class, could be enjoined under the district court’s continuing jurisdiction to enforce and administer the class action settlement. The panel held that the State, having chosen not to participate in the CAFA action, was precluded from seeking the same relief sought in the CAFA class action by operation of the principles of res judicata.
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