Justice Thomas, delivered the opinion of the Court.
This case presents the question whether a federal court may withhold full faith and credit from a state-court judgment approving a class-action settlement simply because the settlement releases claims within the exclusive jurisdiction of the federal courts. The answer is no. Absent a partial repeal of the Full Faith and Credit Act, 28 U. S. C. § 1738, by another federal statute, a federal court must give the judgment the same effect that it would have in the courts of the State in which it was rendered.
In 1990, petitioner Matsushita Electric Industrial Co. made a tender offer for the common stock of MCA, Inc., a
While the state class action was pending, the instant suit was filed in Federal District Court in California. The complaint named Matsushita as a defendant and alleged that Matsushita's tender offer violated Securities and Exchange Commission (SEC) Rules 10b—13 and 14d—10.
After the federal plaintiffs filed their notice of appeal but before the Ninth Circuit handed down a decision, the parties
The order and final judgment of the Chancery Court incorporated the terms of the settlement agreement, providing:
Respondents were members of both the state and federal plaintiff classes. Following issuance of the notice of proposed settlement of the Delaware litigation, respondents neither opted out of the settlement class nor appeared at the hearing to contest the settlement or the representation of the class. On appeal in the Ninth Circuit, petitioner Matsushita invoked the Delaware judgment as a bar to further prosecution of that action under the Full Faith and Credit Act, 28 U. S. C. § 1738.
The Ninth Circuit rejected petitioner's argument, ruling that § 1738 did not apply. Epstein v. MCA, Inc., 50 F.3d 644, 661-666 (1995). Instead, the Court of Appeals fashioned a test under which the preclusive force of a state-court settlement judgment is limited to those claims that "could. . . have been extinguished by the issue preclusive effect of an adjudication of the state claims." Id., at 665. The lower courts have taken varying approaches to determining the preclusive effect of a state-court judgment, entered in a class
The Full Faith and Credit Act mandates that the "judicial proceedings" of any State "shall have the same full faith and credit in every court within the United States .. . as they have by law or usage in the courts of such State . . . from which they are taken." 28 U. S. C. § 1738. The Act thus directs all courts to treat a state-court judgment with the same respect that it would receive in the courts of the rendering State. Federal courts may not "employ their own rules . . . in determining the effect of state judgments," but must "accept the rules chosen by the State from which the judgment is taken." Kremer v. Chemical Constr. Corp., 456 U.S. 461, 481-482 (1982). Because the Court of Appeals failed to follow the dictates of the Act, we reverse.
The state-court judgment in this case differs in two respects from the judgments that we have previously considered in our cases under the Full Faith and Credit Act. As respondents and the Court of Appeals stressed, the judgment was the product of a class action and incorporated a settlement agreement releasing claims within the exclusive jurisdiction of the federal courts. Though respondents urge "the irrelevance of section 1738 to this litigation," Brief for Respondents 25, we do not think that either of these features exempts the judgment from the operation of § 1738.
That the judgment at issue is the result of a class action, rather than a suit brought by an individual, does not undermine
Further, § 1738 is not irrelevant simply because the judgment in question might work to bar the litigation of exclusively federal claims. Our decision in Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373 (1985), made clear that where § 1738 is raised as a defense in a subsequent suit, the fact that an allegedly precluded "claim is within the exclusive jurisdiction of the federal courts does not necessarily make § 1738 inapplicable. " Id., at 380 (emphasis added). In so holding, we relied primarily on Kremer v. Chemical Constr. Corp., supra, which held, without deciding whether claims under Title VII of the Civil Rights Act of 1964 are exclusively federal, that state-court proceedings may be issue preclusive in Title VII suits in federal court. Kremer, we said, "implies that absent an exception to § 1738, state law determines at least the . . . preclusive effect of a prior state judgment in a subsequent action involving a claim within the exclusive jurisdiction of the federal courts." Marrese, 470 U. S., at 381. Accordingly, we decided that "a state court judgment may in some circumstances have preclusive effect in a subsequent action within the exclusive jurisdiction of the federal courts." Id., at 380.
In Marrese, we discussed Nash County Bd. of Ed. v. Biltmore Co., 640 F.2d 484 (CA4), cert. denied, 454 U.S. 878 (1981), a case that concerned a state-court settlement judgment. In Nash, the question was whether the judgment, which approved the settlement of state antitrust claims, prevented the litigation of exclusively federal antitrust claims.
Marrese provides the analytical framework for deciding whether the Delaware court's judgment precludes this exclusively federal action. When faced with a state-court judgment relating to an exclusively federal claim, a federal court must first look to the law of the rendering State to ascertain the effect of the judgment. See id., at 381-382. If state law indicates that the particular claim or issue would be barred from litigation in a court of that State, then the federal court must next decide whether, "as an exception to § 1738," it "should refuse to give preclusive effect to [the] state court judgment." Id., at 383. See also Migra v. Warren City School Dist. Bd. of Ed., 465 U.S. 75, 81 (1984) ("[I]n the absence of federal law modifying the operation of § 1738, the preclusive effect in federal court of [a] state-court judgment is determined by [state] law").
We observed in Marrese that the inquiry into state law would not always yield a direct answer. Usually, "a state court will not have occasion to address the specific question whether a state judgment has issue or claim preclusive effect in a later action that can be brought only in federal court." 470 U. S., at 381-382. Where a judicially approved settlement is under consideration, a federal court may consequently find guidance from general state law on the preclusive force of settlement judgments. See, e. g., id., at
Delaware has traditionally treated the impact of settlement judgments on subsequent litigation in state court as a question of claim preclusion. Early cases suggested that Delaware courts would not afford claim preclusive effect to a settlement releasing claims that could not have been presented in the trial court. See Ezzes v. Ackerman, 234 A.2d 444, 445-446 (Del. 1967) ("[A] judgment entered either after trial on the merits or upon an approved settlement is res judicata and bars subsequent suit on the same claim . . .. [T]he defense of res judicata . . . is available if the pleadings framing the issues in the first action would have permitted the raising of the issue sought to be raised in the second action, and if the facts were known, or could have been known to the plaintiff in the second action at the time of the first action"). As the Court of Chancery has perceived, however, "the Ezzes inquiry [was] modified in regard to class actions," In re Union Square Associates Securities Litigation, C. A. No. 11028, 1993 WL 220528, *3 (June 16, 1993), by the Delaware Supreme Court's decision in Nottingham Partners v. Dana, 564 A.2d 1089 (1989).
In Nottingham, a class action, the Delaware Supreme Court approved a settlement that released claims then pending in federal court. In approving that settlement, the Nottingham court appears to have eliminated the Ezzes requirement that the claims could have been raised in the suit that produced the settlement, at least with respect to class actions:
See Union Square, supra, at *3 (relying directly on Nottingham to hold that a Delaware court judgment settling a class action was res judicata and barred arbitration of duplicative claims that could not have been brought in the first suit). These cases indicate that even if, as here, a claim could not have been raised in the court that rendered the settlement judgment in a class action, a Delaware court would still find that the judgment bars subsequent pursuit of the claim.
The Delaware Supreme Court has further manifested its understanding that when the Court of Chancery approves a global release of claims, its settlement judgment should preclude ongoing or future federal-court litigation of any released claims. In Nottingham, the Court stated that "[t]he validity of executing a general release in conjunction with the termination of litigation has long been recognized by the Delaware courts. More specifically, the Court of Chancery has a history of approving settlements that have implicitly or explicitly included a general release, which would also release federal claims." 564 A. 2d, at 1105 (citation omitted). Though the Delaware Supreme Court correctly recognized in Nottingham that it lacked actual authority to order the dismissal of any case pending in federal court, it asserted that state-court approval of the settlement would have the collateral effect of preventing class members from prosecuting their claims in federal court. Perhaps the clearest statement of the Delaware Chancery Court's view on this matter was articulated in the suit preceding this one: "When a state court settlement of a class action releases all claims which arise out of the challenged transaction and is determined to
Given these statements of Delaware law, we think that a Delaware court would afford preclusive effect to the settlement judgment in this case, notwithstanding the fact that respondents could not have pressed their Exchange Act claims in the Court of Chancery. The claims are clearly within the scope of the release in the judgment, since the judgment specifically refers to this lawsuit. As required by Delaware Court of Chancery Rule 23, see Prezant v. De Angelis, 636 A.2d 915, 920 (1994), the Court of Chancery found, and the Delaware Supreme Court affirmed, that the settlement was "fair, reasonable and adequate and in the best interests of the . . . Settlement class" and that notice to the class was "in full compliance with . . . the requirements of due process." In re MCA, Inc. Shareholders Litigation, C. A. No. 11740 (Feb. 22, 1993), reprinted in App. to Pet. for Cert. 73a, 74a. Cf. Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812 (1985) (due process for class-action plaintiffs requires "notice plus an opportunity to be heard and participate in the litigation"). The Court of Chancery "further determined that the plaintiffs[,] . . . as representatives of the Settlement Class, have fairly and adequately protected the
Because it appears that the settlement judgment would be res judicata under Delaware law, we proceed to the second step of the Marrese analysis and ask whether § 27 of the Exchange Act, which confers exclusive jurisdiction upon the federal courts for suits arising under the Act, partially repealed § 1738. Section 27 contains no express language regarding its relationship with § 1738 or the preclusive effect of related state-court proceedings. Thus, any modification of § 1738 by § 27 must be implied. In deciding whether § 27 impliedly created an exception to § 1738, the "general question is whether the concerns underlying a particular grant of exclusive jurisdiction justify a finding of an implied partial repeal of § 1738." Marrese, 470 U. S., at 386. "Resolution of this question will depend on the particular federal statute as well as the nature of the claim or issue involved in the subsequent federal action. . . . [T]he primary consideration must be the intent of Congress." Ibid.
As a historical matter, we have seldom, if ever, held that a federal statute impliedly repealed § 1738. See Parsons Steel, Inc. v. First Alabama Bank, 474 U.S. 518, 523-525 (1986) (Anti-Injunction Act does not limit § 1738); Migra v. Warren City School Dist. Bd. of Ed., 465 U. S., at 83-85 (42 U. S. C. § 1983 does not limit claim preclusion under § 1738); Kremer v. Chemical Constr. Corp., 456 U. S., at 468-476 (Title VII of the Civil Rights Act of 1964 does not limit § 1738); Allen v. McCurry, 449 U.S. 90, 96-105 (1980) (§ 1983 does not limit issue preclusion under § 1738). But cf. Brown v. Felsen, 442 U.S. 127, 138-139 (1979) (declining to give claim preclusive
Section 27 provides that "[t]he district courts of the United States . . . shall have exclusive jurisdiction . . . of all suits in equity and actions at law brought to enforce any liability or duty created by this chapter or the rules and regulations thereunder." 15 U. S. C. § 78aa. There is no suggestion in § 27 that Congress meant for plaintiffs with Exchange Act claims to have more than one day in court to challenge the legality of a securities transaction. Though the statute plainly mandates that suits alleging violations of the Exchange Act may be maintained only in federal court, nothing in the language of § 27 "remotely expresses any congressional intent to contravene the common-law rules of preclusion or to repeal the express statutory requirements of . . . 28 U. S. C. § 1738." Allen v. McCurry, supra, at 97-98.
Nor does § 27 evince any intent to prevent litigants in state court—whether suing as individuals or as part of a class— from voluntarily releasing Exchange Act claims in judicially approved settlements. While § 27 prohibits state courts from adjudicating claims arising under the Exchange Act, it does not prohibit state courts from approving the release of Exchange Act claims in the settlement of suits over which they have properly exercised jurisdiction, i. e., suits arising under state law or under federal law for which there is concurrent jurisdiction. In this case, for example, the Delaware action was not "brought to enforce" any rights or obligations under the Act. The Delaware court asserted judicial power
The legislative history of the Exchange Act elucidates no specific purpose on the part of Congress in enacting § 27. See Murphy v. Gallagher, 761 F.2d 878, 885 (CA2 1985) (noting that the legislative history of the Exchange Act provides no readily apparent explanation for the provision of exclusive jurisdiction in § 27) (citing 2 & 3 L. Loss, Securities Regulation 997, 2005 (2d ed. 1961)). We may presume, however, that Congress intended § 27 to serve at least the general purposes underlying most grants of exclusive jurisdiction: "to achieve greater uniformity of construction and more effective and expert application of that law." Murphy v. Gallagher, supra, at 885. When a state court upholds a settlement that releases claims under the Exchange Act, it threatens neither of these policies. There is no danger that state-court judges who are not fully expert in federal securities law will say definitively what the Exchange Act means and enforce legal liabilities and duties thereunder. And the uniform construction of the Act is unaffected by a state court's approval of a proposed settlement because the state court does not adjudicate the Exchange Act claims but only evaluates the overall fairness of the settlement, generally by applying its own business judgment to the facts of the case. See, e. g., Polk v. Good, 507 A.2d 531, 535 (Del. 1986).
Furthermore, other provisions of the Exchange Act suggest that Congress did not intend to create an exception to § 1738 for suits alleging violations of the Act. Congress plainly contemplated the possibility of dual litigation in state and federal courts relating to securities transactions. See 15 U. S. C. § 78bb(a) (preserving "all other rights and remedies that may exist at law or in equity"). And all that Congress chose to say about the consequences of such litigation is that plaintiffs ought not obtain double recovery. See ibid. Congress said nothing to modify the background rule that where a state-court judgment precedes that of a federal
Finally, precedent supports the conclusion that the concerns underlying the grant of exclusive jurisdiction in § 27 are not undermined by state-court approval of settlements releasing Exchange Act claims. We have held that statecourt proceedings may, in various ways, subsequently affect the litigation of exclusively federal claims without running afoul of the federal jurisdictional grant in question. In Becher v. Contoure Laboratories, Inc., 279 U.S. 388 (1929) (cited in Marrese, 470 U. S., at 381), we held that state-court findings of fact were issue preclusive in federal patent suits. We did so with full recognition that "the logical conclusion from the establishing of [the state law] claim is that Becher's patent is void." 279 U. S., at 391. Becher reasoned that although "decrees validating or invalidating patents belong to the Courts of the United States," that "does not give sacrosanctity to facts that may be conclusive upon the question in issue." Ibid. Similarly, while binding legal determinations of rights and liabilities under the Exchange Act are for federal courts only, there is nothing sacred about the approval of settlements of suits arising under state law, even where the parties agree to release exclusively federal claims. See also Brown v. Felsen, 442 U. S., at 139, n. 10 (noting that "[i]f, in the course of adjudicating a state-law question, a state court should determine factual issues using standards identical to those of § 17, then collateral estoppel, in the absence of countervailing statutory policy, would bar relitigation of those issues in the bankruptcy court"); Pratt v. Paris Gas Light & Coke Co., 168 U.S. 255, 258 (1897) (when a state court has jurisdiction of the parties and the subject matter of the complaint, the state court may decide the validity of a patent when that issue is raised as a defense).
We have also held that Exchange Act claims may be resolved by arbitration rather than litigation in federal court.
Taken together, these cases stand for the general proposition that even when exclusively federal claims are at stake, there is no "universal right to litigate a federal claim in a federal district court." Allen v. McCurry, 449 U. S., at 105. If class-action plaintiffs wish to preserve absolutely their right to litigate exclusively federal claims in federal court, they should either opt out of the settlement class or object to the release of any exclusively federal claims. In fact, some of the plaintiffs in the Delaware class action requested exclusion from the settlement class. They are now proceeding in federal court with their federal claims, unimpeded by the Delaware judgment.
In the end, §§ 27 and 1738 "do not pose an either-or proposition." Connecticut Nat. Bank v. Germain, 503 U.S. 249, 253 (1992). They can be reconciled by reading § 1738 to mandate full faith and credit of state-court judgments incorporating global settlements, provided the rendering court had jurisdiction over the underlying suit itself, and by reading § 27 to prohibit state courts from exercising jurisdiction over suits arising under the Exchange Act. Cf. 18 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 4470, pp. 688-689 (1981) ("[S]ettlement of state court litigation has been held to defeat a subsequent federal action if the settlement was intended to apply to claims in exclusive federal jurisdiction as well as other claims. . . . These rulings
The Court of Appeals did not engage in any analysis of Delaware law pursuant to § 1738. Rather, the Court of Appeals declined to apply § 1738 on the ground that where the rendering forum lacked jurisdiction over the subject matter or the parties, full faith and credit is not required. 50 F. 3d, at 661, 666. See Underwriters Nat. Assurance Co. v. North Carolina Life & Accident & Health Ins. Guaranty Assn., 455 U.S. 691, 704-705 (1982) ("`[A] judgment of a court in one State is conclusive upon the merits in a court in another State only if the court in the first State had power to pass on the merits—had jurisdiction, that is, to render the judgment' ") (quoting Durfee v. Duke, 375 U.S. 106, 110 (1963)). The Court of Appeals decided that the subject-matter jurisdiction exception to full faith and credit applies to this case because the Delaware court acted outside the bounds of its own jurisdiction in approving the settlement, since the settlement released exclusively federal claims. See 50 F. 3d, at 661-662, and n. 25.
As explained above, the state court in this case clearly possessed jurisdiction over the subject matter of the underlying suit and over the defendants. Only if this were not so—for instance, if the complaint alleged violations of the Exchange Act and the Delaware court rendered a judgment
* * *
The judgment of the Court of Appeals is reversed, and the case is remanded for proceedings consistent with this opinion.
It is so ordered.
Justice Stevens, concurring in part and dissenting in part.
While I join Parts I, II—A, and II—C of the Court's opinion, and while I also agree with the Court's reasons for concluding that § 27 of the Securities Exchange Act of 1934 does not create an implied partial repeal of the Full Faith and Credit Act, I join neither Part II—B nor the Court's judgment because I agree with Justice Ginsburg that the question of Delaware law should be addressed by the Court of Appeals in the first instance, and that the Ninth Circuit remains free to consider whether Delaware courts fully and fairly litigated the adequacy of class representation.
I join the Court's judgment to the extent that it remands the case to the Ninth Circuit. I agree that a remand is in order because the Court of Appeals did not attend to this Court's reading of 28 U. S. C. § 1738 in a controlling decision, Kremer v. Chemical Constr. Corp., 456 U.S. 461 (1982). But I would not endeavor, as the Court does, to speak the first word on the content of Delaware preclusion law. Instead, I would follow our standard practice of remitting that issue for decision, in the first instance, by the lower federal courts. See, e. g., Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 387 (1985).
I write separately to emphasize a point key to the application of § 1738: A state-court judgment generally is not entitled to full faith and credit unless it satisfies the requirements of the Fourteenth Amendment's Due Process Clause. See Kremer, 456 U. S., at 482-483. In the class-action setting, adequate representation is among the due process ingredients that must be supplied if the judgment is to bind absent class members. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 808, 812 (1985); Prezant v. De Angelis, 636 A.2d 915, 923-924 (Del. 1994).
Suitors in this action (called the "Epstein plaintiffs" in this opinion), respondents here, argued before the Ninth Circuit, and again before this Court, that they cannot be bound by the Delaware settlement because they were not adequately represented by the Delaware class representatives. They contend that the Delaware representatives' willingness to release federal securities claims within the exclusive jurisdiction of the federal courts for a meager return to the class members, but a solid fee to the Delaware class attorneys, disserved the interests of the class, particularly, the absentees. The inadequacy of representation was apparent, the Epstein plaintiffs maintained, for at the time of the settlement,
Matsushita's acquisition of MCA prompted litigation in state and federal courts. A brief account of that litigation will facilitate comprehension of the Epstein plaintiffs' position. On September 26, 1990, in response to reports in the financial press that Matsushita was negotiating to buy MCA, a suit was filed in the Court of Chancery of Delaware, a purported class action on behalf of the stockholders of MCA. Naming MCA and its directors (but not Matsushita) as defendants, the complaint invoked state law only. It alleged that MCA's directors had failed to carry out a market check to maximize shareholder value upon a change in corporate control, a check required by Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 182 (Del. 1986). For this alleged breach of fiduciary duty, the complaint sought, inter alia, an injunction against Matsushita's proposed acquisition of MCA.
Matsushita announced its tender offer on November 26, 1990. It offered holders of MCA common stock $71 per share, if they tendered their shares before December 29, 1990. The owners of 91% of MCA's common stock tendered their shares and, on January 3, 1991, for a price of $6.1 billion, Matsushita acquired MCA.
On December 3, 1990, a few days after the required Securities and Exchange Commission (SEC) filings disclosed the terms of the tender offer, several MCA shareholders filed suit in the United States District Court for the Central District
Two days later, counsel in the Delaware action advised MCA's counsel that the Delaware plaintiffs intended to amend their complaint to include additional claims against MCA and its directors and to add Matsushita as a defendant. The additional claims alleged that MCA wasted corporate assets by increasing the corporation's exposure to liability for violation of Rules 10b—13 and 14d—10, that MCA failed to
Within days, the Delaware parties agreed to a settlement and, on December 17, 1990, submitted their proposal to the Delaware Vice Chancellor. The agreement provided for a modification of a "poison pill" in the corporate charter of an MCA subsidiary,
The Vice Chancellor rejected the settlement agreement on April 22, 1991, for two reasons: the absence of any monetary benefit to the class members; and the potential value of the federal claims that the agreement proposed to release. The "generous payment" of $1 million in counsel fees, the Vice Chancellor observed, "confer[red] no benefit on the members of the Class." In re MCA, Inc. Shareholders Litigation, 598 A.2d 687, 695 (Del. Ch. 1991). And the value of the revised poison pill to the class, the Vice Chancellor said, was "illusionary[,] . . . apparently . . . proposed merely to justify a settlement which offers no real monetary benefit to the Class." Id. , at 696. The Vice Chancellor described the state-law claims as "at best, extremely weak and, therefore, [of] little or no value." Id. , at 694. "[T]he only claims which have any substantial merit," he said, "are the claims. . . in the California federal suit that were not asserted in this Delaware action." Id. , at 696. After the rejection of
The federal litigation proceeded. In various rulings, the District Court denied the federal plaintiffs' motion for partial summary judgment, denied the Epstein plaintiffs' motion for class certification, and granted Matsushita's motion for summary judgment dismissing the claims. On April 15, 1992, the District Court entered its final judgment, which the Epstein plaintiffs appealed to the Ninth Circuit.
On October 22, 1992, after the federal plaintiffs had filed their notice of appeal, the Delaware parties reached a second settlement agreement. Matsushita agreed to create a $2 million settlement fund that would afford shareholders 2 to 3 cents per share before payment of fees and costs. The Delaware class counsel requested $691,000 in fees. In return for this relief, the Delaware plaintiffs agreed to release "all claims, rights and causes of action (state or federal, including but not limited to claims arising under the federal securities laws, and any rules or regulations promulgated thereunder, or otherwise) . . . in connection with or that arise now or hereafter out of the [tender offer] . . . including without limitation the claims asserted in the California Federal Actions . . . ." App. 187-188. Unlike the first settlement proposal, the second agreement included an opt-out provision.
This time the Vice Chancellor approved the settlement. He stated: "[I]t is in the best interests of the class to settle this litigation and the terms of the settlement are fair and reasonable—although the value of the benefit to the class is meager." In re MCA, Inc. Shareholders Litigation, C. A. No. 11740, 1993 WL 43024, *1 (Del. Ch., Feb. 16, 1993). He found the class members' recovery of 2 to 3 cents per share "adequate (if only barely so) to support the proposed settlement." Id. , at *4. The federal claims, he reasoned, having been dismissed by the District Court, "now have minimal economic value." Ibid. And he gave weight to the presence
Addressing the objectors' contention that the proposed settlement was "collusive," the Vice Chancellor recalled that "the settling parties ha[d] previously proposed a patently inadequate settlement," and he agreed that "suspicions abound." Id. , at *5. Nevertheless, he noted, the "[o]bjectors have offered no evidence of any collusion," so he declined to reject the settlement on that ground. Ibid. Reducing the counsel fees from the requested $691,000 to $250,000, the Vice Chancellor offered this observation: "[T]he defendants' willingness to create the settlement fund seems likely to have been motivated as much by their concern as to their potential liability under the federal claims as by their concern for liability under the state law claims which this Court characterized as `extremely weak.' " Id. , at *6. In a brief order, the Delaware Supreme Court affirmed "on the basis of and for the reasons assigned by the Court of Chancery . . . ." In re MCA, Inc. Shareholders Litigation, C. A. No. 126,1993, 1993 WL 385041, *1 (Sept. 21, 1993), judgt. order reported at 633 A.2d 370.
Before the Ninth Circuit, Matsushita argued that the Delaware class-action settlement barred litigation of the federal claims raised in the Epstein action. The Ninth Circuit disagreed. Relying on Federal Circuit Court decisions,
On the merits, the Ninth Circuit held, first, that a private right of action could be maintained to redress Rule 14d—10 violations. Id. , at 652. The court next held that Matsushita violated Rule 14d—10 by paying Wasserman consideration not offered to other shareholders, id. , at 657; reversing the District Court's disposition of this matter, the Ninth Circuit held that plaintiffs were entitled to summary judgment on liability and remanded for a determination of damages, ibid. Regarding plaintiffs' claim that the $21 million payment to Sheinberg violated Rule 14d—10, the Ninth Circuit vacated the summary judgment for Matsushita and remanded for a determination whether the payment was in fact made to encourage Sheinberg to tender his shares. Id. , at 659.
Section 1738's full faith and credit instruction, as the Court indicates, requires the forum asked to recognize a judgment first to determine the preclusive effect the judgment would have in the rendering court. See Kremer, 456 U. S., at 466; Marrese, 470 U. S., at 381. Because the Ninth Circuit did not evaluate the preclusive effect of the Delaware judgment through the lens of that State's preclusion law, I would remand for that determination. See id., at 386-387; Migra v. Warren City School Dist. Bd. of Ed., 465 U.S. 75, 87 (1984) ("Prudence . . . dictates that it is the District Court, in the
Every State's law on the preclusiveness of judgments is pervasively affected by the supreme law of the land. To be valid in the rendition forum, and entitled to recognition nationally, a state court's judgment must measure up to the requirements of the Fourteenth Amendment's Due Process Clause. Kremer, 456 U. S., at 482-483. "A State may not grant preclusive effect in its own courts to a constitutionally infirm judgment, and other state and federal courts are not required to accord full faith and credit to such a judgment." Id. , at 482 (footnote omitted).
In Phillips Petroleum Co. v. Shutts, this Court listed minimal procedural due process requirements a class-action money judgment must meet if it is to bind absentees; those requirements include notice, an opportunity to be heard, a right to opt out, and adequate representation. 472 U. S., at 812. "[T]he Due Process Clause of course requires that the named plaintiff at all times adequately represent the interests of the absent class members." Ibid. (citing Hansberry v. Lee, 311 U.S. 32, 42-43, 45 (1940)). As the Shutts Court's phrase "at all times" indicates, the class representative's duty to represent absent class members adequately is a continuing one. 472 U. S., at 812; see also Gonzales v. Cassidy, 474 F.2d 67, 75 (CA5 1973) (representative's failure to pursue an appeal rendered initially adequate class representation inadequate, so that judgment did not bind the class).
Although emphasizing the constitutional significance of the adequate representation requirement, this Court has recognized
In Delaware, the constitutional due process requirement of adequate representation is embodied in Delaware Court of Chancery's Rule 23, a class-action rule modeled on its federal counterpart. Prezant, 636 A. 2d, at 923, 920. Delaware requires, as a prerequisite to class certification, that the named
The Delaware Supreme Court underscored that due process demands more than notice and an opportunity to opt out; adequate representation, too, that court emphasized, is an essential ingredient. Id. , at 924 (citing Phillips Petroleum Co. v. Shutts, 472 U. S., at 812). Notice, the Delaware Supreme Court reasoned, cannot substitute for the thorough examination and informed negotiation an adequate representative would pursue. Prezant, 636 A. 2d, at 924. The court also recognized that opt-out rights "are infrequently utilized and usually economically impracticable." Ibid.
The Vice Chancellor's evaluation of the merits of the settlement could not bridge the gap, the Delaware Supreme Court said, because an inadequate representative "taint[s]" the entire settlement process. Id., at 925.
In the instant case, the Epstein plaintiffs challenge the preclusive effect of the Delaware settlement, arguing that the Vice Chancellor never in fact made the constitutionally required determination of adequate representation. See id. , at 923.
Mindful that this is a court of final review and not first view, I do not address the merits of the Epstein plaintiffs' contentions, or Matsushita's counterargument that the issue of adequate representation was resolved by full and fair litigation in the Delaware Court of Chancery.
Thaddeus Holt filed a brief for C. L. Grimes as amicus curiae urging affirmance.