'Claim Splitting' in Class Actions: Should Defense Counsel Care?

The rule against claim splitting derives from the related doctrines of merger, bar, and res judicata. Under the Restatement (Second) of Judgments '24, a final judgment extinguishes “all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose.” Section 24 applies to bar a second action against the defendant, even though the plaintiff is prepared in the second action to “present evidence or grounds or theories of the case not presented in the first action” or “seek remedies or forms of relief not demanded in the first action.” See Restatement (Second) of Judgment '25. A party is therefore barred from re-litigating in a second action claims that were actually litigated, or could have been litigated, in the first. Courts generally agree (subject to the exceptions discussed below) that once a class is certified, all members of the class who do not opt out are bound by the judgment for res judicata purposes regardless of the outcome. See, eg, Rector v. City and County of Denver, 348 F.2d 935, 949 (10th Cir. 2003) (the “usual principles of both claim and issue preclusion apply in class actions”). In other words, win or lose, members of our hypothetical class who do not opt out should be barred from asserting their personal injury claims in subsequent individual actions.

The first reason defense counsel should care about claim splitting is that it calls into question the propriety of class certification. Under Federal Rule of Civil Procedure 23(a)(4), and its state court equivalents, a putative class representative must demonstrate that he or she “will fairly and adequately protect the interests of the class.” Some courts have held that claim splitting is an insurmountable obstacle to class certification because the putative class representative is, in effect, sacrificing the claims that have not been asserted on behalf of the absent class members. See, Phillips Petroleum Co. v. Bowden, 108 S.W.3d 385, 404 (Tex. App. 2003). This is particularly true where, as in our hypothetical, the claims that are asserted are common to all class members and the claims that are being sacrificed are not possessed by all class members but are potentially more valuable. See, eg, In re Universal Service Fund Telephone Billing Practices Litig., No. 02-MD-1468-JWL, 2004 WL 303095, at *7 (D.Kan. Feb. 13, 2004) (claim splitting may be permissible where claims are omitted to further class certification and thereby further the interests of the class, but give rise to a conflict of interest where named plaintiff is advancing his or her interests at the expense of the class).